Oral Answers to Questions

INTERNATIONAL DEVELOPMENT

The Secretary of State was asked—

Cotonou Process

Tony Lloyd: If he will make a statement on the representations he has received about the development aspects of the Cotonou process.

Gareth Thomas: We are engaged in ongoing discussions with European partners and others on the future of European development and co-operation, including that provided to African, Caribbean and Pacific states under the Cotonou agreement. My right hon. Friend the Secretary of State will meet European partners to discuss that issue, among others, in Brussels on 17 November at the General Affairs and External Relations Council. My right hon. Friend has received a representation from Traidcraft on economic partnership agreements—the trade pillar of the Cotonou agreement—and the Department of Trade and Industry, which leads on this issue, holds regular meetings with non-governmental organisations on those negotiations to discuss their concerns.

Tony Lloyd: I am delighted to know that Traidcraft has made representations to my right hon. Friend the Secretary of State. Will the Minister confirm, however, that there is real concern among the NGOs—but, more importantly, among the ACP countries—that the Cotonou agreement may act to sabotage the gains that were made in Cancun? In particular, if the European Union sees the Cotonou agreement as a way to drive region-by-region agreements, to the disadvantage of the poorest people, it will be disastrous in development terms. Will he make it clear that the Government will not go down that road, but that we will instead offer ways to provide practical support to developing countries to ensure that they can negotiate properly with the EU?

Gareth Thomas: I can give my hon. Friend that assurance. As we have made clear in the House and as other members of the negotiating team have made clear, getting the Doha development round talks back on track is absolutely fundamental to our agenda. In that context, we recognise that we have to start from where the negotiations left off, and not move off into the sort of regional or bilateral negotiations that have been feared by a number of countries. So we remain absolutely committed to getting multilateral negotiations back on track that seek to achieve the development objectives that my hon. Friend and, indeed, the developing countries want to see.

Michael Fabricant: Is not the real obstacle to the Cotonou process the subsidies that are provided to farmers in the EU and in the United States, producing unfair competition with farmers in Africa and other parts of the developing world? What can the Minister do, at least in the EU, to try to ensure that the common agricultural policy is reformed and still ensure that the US can lower its subsidies, too, as a consequence?

Gareth Thomas: The hon. Gentleman is broadly right about the importance of making progress to reduce the adverse impact of agricultural subsidies. I am sure that he will have welcomed the historic decision taken in June this year by the EU in respect of the CAP negotiations that allowed us to make progress at Cancun. We are also seeking to secure a reduction in subsidies in relation to other EU commodity regimes, such as those for cotton and sugar, to continue the sense of progress that is being made.

Colombia

Lynne Jones: What progress is being made in Colombia towards the achievement of millennium development goals.

Gareth Thomas: Colombia is on track to achieve most of the millennium development goals. Good progress has been made towards the targets to achieve universal basic primary education, to eliminate gender disparity in primary education and to reduce maternal mortality. Progress towards the goal of reducing by half the proportion of people living on less than $1 a day remains fragile owing to the recent economic crisis.

Lynne Jones: According to UNICEF education spending needs to increase by 50 per cent. if Colombia is to achieve basic education for all by 2015, yet the high level of indebtedness and the increased military spending owing to the conflict are squeezing out social spending. What help can the Government give to Colombia to ensure that it meets its commitment, given in London, to honour the UN recommendation that a consistent strategy will be developed to reduce illiteracy and unemployment and increase access to health care, education and housing?

Gareth Thomas: I hope that my hon. Friend will be reassured to hear that significant assistance is provided to Colombia to help with its social spending programmes in health and education through, for example, the World Bank, the European Commission and the Inter-American Development Bank. We continue to have regular discussions and dialogue with those multilateral players to try to ensure that those spending programmes are focused on the efforts to reduce poverty in the areas that I have outlined.

Nigel Evans: As the Minister will know, two of the goals lead with economic sustainability and development. He will know that large tracts of Colombia in the rain forests have been illegally logged to make way for coca plantations. What extra support can the Government give to President Uribe in trying to combat that illegal trade and ensure that the poverty associated with it can be eradicated?

Gareth Thomas: The hon. Gentleman will be delighted to know that the EU intends to publish a draft regulation on the issue of illegal logging following discussions that have taken place in Africa—recently in Cameroon—on making progress in this area, and following other work that has taken place in Asia. Further work is needed in the European Union, and we are active in those discussions, arguing for further action to be taken at European level to reduce the purchase of the products of illegal logging, in this country and other European states.

Peter Kilfoyle: I recently visited Colombia, and was impressed by the programmes being sponsored there by Her Majesty's Government. Can the Minister tell me whether those are the very same programmes that are being threatened with cuts in order to pay for the mess created in Iraq?

Gareth Thomas: The programmes in Colombia were coming to an end anyway, regardless of the decisions that we are taking in relation to Iraq. The significant resources going into Colombia through the multilateral financial institutions such as the World Bank and the Inter-American Development Bank, with which we work closely, will help to continue to improve health care and education services in those countries. On the specific question of Iraq, given the ongoing needs of the Iraqi people, I think that we have taken the right decision to stay with them and to provide further reconstruction assistance.

Tom Brake: In relation to millennium development goal No. 8, can the Minister say what discussions have taken place with the Ministry of Defence about the conditions that should be attached to UK military aid to Colombia? Can the Minister say whether there should be a link between progress in its human rights record and military aid, whether officers coming to the UK for training should be properly vetted and have their visas vetted, and whether, for instance, the Government should ensure that Colombian military units that are receiving aid are not currently involved in any alleged human rights abuses, and have not previously been involved in any alleged human rights abuses?

Gareth Thomas: The hon. Gentleman is absolutely right to raise the issue of human rights abuses, and we continue to be extremely concerned about the ongoing level of such abuses. I was struck by the figures that I saw showing that Colombia sees the highest number of abuses in terms of the number of members of trade unions. Continuing to reduce the number of human rights abuses by the military and paramilitary forces is essential. In that respect, I am sure that he will be pleased that in July this year a meeting on international support to Colombia was held in London and major donors welcomed the Colombian Government's pledge to implement a series of recommendations from the United Nations High Commissioner for Human Rights.

AIDS

Mark Lazarowicz: If the Government will press other G8 members to ensure more extensive concessions from the pharmaceuticals industry for poorer countries affected by AIDS.

Hilary Benn: We are seeking to make essential drugs, including those for the treatment of HIV/AIDS, more widely available in developing countries. That includes working with G8 partners, developing country Governments, multilateral institutions, the pharmaceutical industry, investors and non-governmental organisations to encourage companies to reduce their prices.

Mark Lazarowicz: The agreement on the supply of cheap drugs was of course very welcome, and I pay tribute to the Government's part in achieving that. My right hon. Friend the Secretary of State will know, however, that some pharmaceutical interests in some countries are trying to limit the scope of the agreement that was arrived at. Does he agree that it is important that the poor and developing countries achieve maximum benefits from this agreement, and will he ensure that the Government work to achieve that in the continuing negotiations over its implementation?

Hilary Benn: My hon. Friend is absolutely right. Having achieved this agreement, after the difficulties in securing its negotiation last December, it is important that the countries for which it is designed are able to make full and effective use of it. I assure him that the Government will continue to do all that we can both to support countries in building their capacity to make use of it and in making any necessary changes to our patent legislation in consultation with our European colleagues, to ensure that we have the framework in place, so that if requests are made for drugs to be exported from the UK, that can happen.

Andrew Robathan: While accepting the enormous importance of anti-retroviral treatment, especially for mother-child transmission, does the Secretary of State agree that for countries that have very limited health resources, the example of Uganda shows that the most important factor in combating the AIDS pandemic is education and the behavioural change that can thereby be achieved?

Hilary Benn: The hon. Gentleman is absolutely right. The right approach is, in truth, a combination of all those things. In Uganda, political leadership—from the President down—has resulted in real reductions in the prevalence of HIV/AIDS in that country. That is an example of leadership that other countries would do well to follow. At the same time, the approach is about providing health support and better nutrition and also taking advantage of the opportunities for treatment that are available because the price of drugs is coming down. A combination of those things will give us the best prospect of supporting African countries, especially where the problem is so great, in tackling the enormous AIDS epidemic.

Linda Gilroy: My right hon. Friend said in his initial reply that he is seeking to engage multinationals. Does that include multinationals that are not pharmaceutical companies because they have a great interest in the matter and need to build up their work forces? Will he say a little more about how he will try to engage such companies?

Hilary Benn: As I have indicated, we are engaging the pharmaceutical companies because of the contribution that they can make to bring down the price of the medicines, and doing more research on the diseases to which we paid less attention in the past but that matter enormously to developing countries. My hon. Friend draws attention to what is happening in South Africa, for example, where several mining companies are making anti-retrovirals available to their work forces because they appreciate the benefit of that for not only the health care of their workers, but the impact on their productivity and ability to work. The public health challenge faced by the world and especially sub-Saharan Africa on HIV/AIDS means that there is increased understanding of the economic challenge. If HIV/AIDS is not tackled, the economic disaster that will affect countries will be significant.

Julian Lewis: Now that progress has been made on gaining a supply of cheaper anti-AIDS drugs, will the Secretary of State tell us what the Government are doing to ensure that there is improved distribution among the target countries? Does he accept that the scale of the health problem probably compares with that which faced the allies when they liberated the concentration camps, and does he agree that it really requires effort on an international scale? What steps are the Government taking, and what will be the role of international organisations, especially the United Nations, in ensuring that the cheaper drugs are distributed to the people who desperately need them?

Hilary Benn: I welcome the hon. Gentleman to the Dispatch Box in his new capacity. In saying that he puts his finger on the real challenge, the answer to the question is that we should work with all international agencies and companies, including organisations such as the accelerating access initiative, which already has 150 arrangements in place in 56 countries. Donors, those who are concerned and those who provide money have to channel efforts in support of country-owned and country-led programmes. We do not want a multiplicity of people trying to do good. We want to focus our energy on supporting country Governments, one AIDS commission and one AIDS programme so that we can ensure that we get the maximum benefit from the changes that he described.

Maternal Mortality

Christine Russell: What recent progress has been made in meeting millennium development goal targets for reducing maternal mortality.

Hilary Benn: The proportion of women worldwide who gave birth with the assistance of a skilled health worker increased from 42 per cent. in 1990 to 52 per cent. by 2000. However, progress toward the millennium development goal target of reducing maternal mortality by two thirds by 2015 is too slow and unevenly spread across regions. We need faster progress, particularly in sub-Saharan Africa, and that will only be achieved through commitment, international leadership and action where it matters, which is in the countries themselves.

Christine Russell: May I thank my right hon. Friend for his reply? I am delighted to hear that he acknowledges the scale of the problem. I do not know whether the House—[Interruption.]

Mr. Speaker: Order. Please allow the hon. Lady to be heard or it is unfair. [Hon. Members: "Hear, hear."] Perhaps those who are cheering will agree with me.

Christine Russell: Thank you, Mr. Speaker. The greatest health divide in the world today is on maternal health. More than 500,000 women die every year as a result of complications during pregnancy or childbirth. I am delighted to hear that the Secretary of State wants to give greater priority to safe motherhood programmes. What are his views on providing more resources for traditional birth attendants simply to help with basic hygiene and reproductive health in the countries of sub-Saharan Africa?

Hilary Benn: There is a place for both within the system, although evidence from recent studies suggests that the biggest gain comes from enabling women who have complications in pregnancy to have access to a skilled birth attendant. So it is about training the traditional birth attendants to identify the signs and then to refer people. One of the programmes that we are supporting in Malawi, which I visited the year before last and where maternal mortality is a big problem, works with the ambulance service so that it understands that when it receives a call reporting complications in pregnancy, it prioritises the transport of the mother to hospital where she gets access to skilled advice and care.

Jenny Tonge: Will the Secretary of State assure the House that despite the reorganisation of his Department, the emphasis on reproductive health in the developing world will not change, because reproductive health clinics are very important in reducing maternal mortality? Will he take the opportunity next week during the visit of the US President to persuade him to restore the funding he has cruelly withdrawn from United Nations Population Fund programmes all over the world?

Hilary Benn: I am happy to give the hon. Lady the assurance she seeks on the Department's commitment to reproductive health. Although the Secretary of State has changed, that commitment will not. We give strong support, as she knows, to the UNFPA as an organisation. We take a different view of the UNFPA from the Americans precisely because—she will understand this only too well because of her experience—it is a way of making an important contribution to reproductive health and all the benefits that flow from that for women and their children.

Tony Baldry: It is important to meet all the millennium development goals as much in middle-income countries as in least-developed countries. The Secretary of State may have missed the point. When extra money was needed in the past for Iraq or somewhere, the money would come from the Treasury's contingency reserve. One would expect the Secretary of State to get an extra £100 million out of the Chancellor specifically for that purpose rather than reducing mainstream budgets by £100 million. The concern is not just the £100 million, but the precedent that it sets for future spending on humanitarian and other crises. All that will happen is that DFID mainstream budgets will get screwed instead of the Secretary of State getting extra money from the Chancellor's contingency reserve.

Hilary Benn: The hon. Gentleman will know from his experience that part of DFID's job has always been to respond to humanitarian crises that arise. That is not new. He will be aware that most of the funding has come from other sources, including the central contingency reserve and our own contingency reserve. That has not affected our funding for humanitarian work or emergencies elsewhere. For example, since the conflict in Iraq, we have given extra funding to the Palestinian territories, to Liberia and to deal with the food crisis in southern Africa.
	The hon. Gentleman also has to acknowledge that we have made a commitment to increase the proportion of the aid that we give to the poorest countries of the world. I am not prepared to change that commitment because with a rising aid budget, which is what we have got, we can provide greater benefit and do more good. Over the next two years, DFID's development budget will rise by nearly £1 billion a year.

Millennium Development Goals

James Plaskitt: If he will make a statement on the timetable for achieving the millennium development goals.

Hilary Benn: The millennium development goals include specific targets significantly to reduce poverty by, in most cases, 2015. The exceptions are the 2005 target for gender equality in schools and the 2020 target for improving the lives of slum dwellers. The headline target for halving absolute poverty between 1990 and 2015 looks likely to be met globally, but for most of the other targets a significant increase in effort will be needed to meet the millennium development goal deadlines.

James Plaskitt: It is a matter of concern that the timetable on many important objectives is slipping. Does my right hon. Friend agree that funding is a key to getting back on target? To that effect, does he agree that all creditors need to deliver debt relief under the heavily indebted poor countries initiative? How quickly can we get the international finance facility under way?

Hilary Benn: My hon. Friend is right about the importance of making further progress on debt relief, although we must recognise the $70 billion-worth of debt relief that HIPC has already delivered. The international finance facility proposed by my right hon. Friend the Chancellor is the best option on the table for increasing the resources that we need to help meet the millennium development goals between now and 2015. We are working hard to persuade our international partners to adopt the idea because it would allow us to make genuine progress.

John Bercow: I look forward to the truly formidable task of seeking to shadow such an eloquent Secretary of State. Given that all parties in the House back the millennium development goals of tackling extreme poverty and hunger, delivering universal primary education, promoting sexual equality, reducing child death rates, improving mothers' health, combating AIDS, malaria and other diseases, protecting the environment and developing a global partnership for development mainly by 2015, but also given the fact that the World Bank's recent report shows that in sub-Saharan Africa in particular progress is woefully slow, will the right hon. Gentleman tell the House whether he agrees that on current trends the extreme poverty reduction target will not be met for 147 years, the target on child poverty will not be met for 162 years, and others may not be reached for 186 years, as the Chancellor told the Select Committee on International Development only last Thursday?

Hilary Benn: I welcome the hon. Gentleman to his new post. It will be a pleasure to work with him and occasionally disagree with him at the Dispatch Box. I am glad that in his very first question he demonstrated his encyclopaedic memory and knowledge of the subject. He is right to identify the fact that, on current trends, we are not making sufficient progress to meet the millennium development goals, which is why our contributions are, first, the rising UK aid budget—I hope that that is something that he will support—and secondly, the international finance facility, which I referred to a moment ago and is the best option on the table for getting additional finance to meet the objectives that he has just identified.

John Bercow: I accept some of what the right hon. Gentleman said, but I am afraid that in total it was not good enough. Given that middle-income countries are still home to at least 140 million people living in poverty, that the Prime Minister promised on 25 April that help for such people would continue as planned, and that the statement to the House on 14 October made no mention of impending cuts, how does the Secretary of State justify the savage £100 million cut in funding involving the complete withdrawal of programmes from Anguilla, Croatia, Egypt, Honduras, Macedonia, Peru, Romania, and the Turks and Caicos islands, and cuts affecting at least a dozen other countries? Is it not a standing disgrace—

Mr. Speaker: Order. The hon. Gentleman must trim his questions in future.

Hilary Benn: I shall try to trim my answer, Mr. Speaker.
	Our decisions have not affected funding for humanitarian work and we were already planning to withdraw from a number of the programmes to which we referred long before Iraq because, as I explained to the Chairman of the International Development Committee, we made a commitment to increase the support that we give to the poorest countries in the world. It would be interesting to hear from him in his new capacity in due course whether or not he supports the Government's commitment that by 2005–06, 90 per cent. of our growing aid budget will be spent on the poorest countries. I think that that is the right policy—does he?

St. Vincent and the Grenadines

Peter Pike: What discussions his Department has had with the Government of St. Vincent and the Grenadines regarding financial support from Her Majesty's Government.

Gareth Thomas: Following discussions in 2002, debt relief under the Commonwealth debt initiative was agreed for St. Vincent and the Grenadines. A total of £2,332,000 in aid debt repayments due to the UK over the period up to 2010–11 was forgiven. St. Vincent is also eligible for support from a DFID-funded education programme for the eastern Caribbean states, and has started activities under that programme.

Peter Pike: I thank my hon. Friend for that answer. He will know that St. Vincent and the Grenadines is a very small country—in fact, its population is only just above that of our own constituencies. He will recognise that those people need education aid, particularly books and computers, but does he recognise that there is a particular need for a new prison? They accept that their prison does not meet the requirements of 2003: that is a major problem for such a small country. What help can the Government give to make the prison at least fit for people to stay in?

Gareth Thomas: My hon. Friend will be pleased to know that the Prime Minister of St. Vincent is considering building a new prison and has identified a site for it. We are providing technical assistance for that work and ongoing training support to the staff who work in the existing prison. I know that my hon. Friend has just come back from visiting St. Vincent, and I am happy to have a longer conversation with him if he would like that.

PRIME MINISTER

The Prime Minister was asked—

Engagements

Doug Naysmith: If he will list his official engagements for Wednesday 12 November.

Tony Blair: Before I list my engagements for the day, I am sure that the whole House would want to join me in expressing our deep condolences to the Italian Government, the Italian people and the families of those people who have been tragically murdered in the latest terrorist attack in southern Iraq; and also to the families of the 17 people recently killed in Saudi Arabia, five of them children, from the same type of terrorist source. That shows how very real and alive the terrorist threat is.
	This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

Doug Naysmith: My right hon. Friend will be aware of the recent research report from the TUC that indicates that 170,000 workers are being paid less than the minimum wage. Does he agree that that is a scandal; and can he tell the House what he intends to do to ensure that unscrupulous employers do not cheat their employees?

Tony Blair: My hon. Friend is right to draw attention to that issue. That is precisely why we are working very hard with trade unions and voluntary organisations to ensure that people are paid the minimum wage to which they are entitled. We on this side of the House are proud that we have introduced the minimum wage and proud that almost 2 million people have benefited from it. We intend to carry on raising the minimum wage as and when we can to provide a better deal for the low paid at work; and we are proud that the Conservatives seem to have recanted their opposition—although we are somewhat sceptical as to whether they mean it.

Michael Howard: I begin by associating myself with the condolences that the Prime Minister expressed to the victims of both the outrages to which he referred. We send our sincerest sympathy to the families of the victims of those terrible events.
	Two weeks ago, the Health Secretary said that he wanted to cut administration costs in his Department by a third. Can the Prime Minister tell us by how much those costs have gone up in the past five years?

Tony Blair: Overall in the national health service, the biggest increase—I am sorry. First of all, I should welcome the right hon. and learned Gentleman to his new position and say how delighted I am that someone who was written off under the last Conservative Government is now given the chance to rehabilitate himself under Labour.
	As for staff—yes, it is true that we want to streamline and slim down the number of staff at the centre of the health service, but the biggest thing that we are doing is increasing the number of nurses and doctors in the health service. Of course, that is the result of the extra money that the right hon. and learned Gentleman opposed when he had the chance to vote for it a few months ago.

Michael Howard: I am very grateful to the Prime Minister for his warm words of welcome, but I am afraid that he did not answer the question. Let me give him the answer. Administration costs in the Department of Health have gone up by a third, so an extra £229 million has been spent on running the Department of Health—and now the Health Secretary tells us that it was all a waste of money.
	Let us try the Treasury. Has anyone told the First Lord of the Treasury how much administration costs have increased there over the past five years? Can he give us that figure?

Tony Blair: I assume that the right hon. and learned Gentleman has already got the answer, but I can tell him about overall Government administration costs. As a proportion of spending, they have fallen under this Government.
	Before I come to the Treasury, I should like to deal with what the extra money in the national health service has bought. The other day, the right hon. and learned Gentleman said that all the money had gone into administration and none into patient care. The extra money means that we have increased the number of people who have hospital operations by 250,000; we have increased the number who receive primary care and cancer specialists; we have cut the number of people who suffer from heart disease; we have got 24 major new hospitals built; and we have 50,000 extra nurses. Again, he opposed every penny piece.

Michael Howard: Well, Mr. Speaker, two questions asked and neither answered—not a very good start. Administration costs at the Treasury have increased by 52 per cent. Since the right hon. Gentleman became Prime Minister, the cost of running Departments, not front-line services, has gone up by 50 per cent. That is nearly £7 billion a year. Is not that eloquent testimony to the Government's ineffectiveness, ineptitude and sheer incompetence, all at the expense of the hard-pressed British taxpayer?

Tony Blair: Right, we want to talk about ineptitude and incompetence, do we? Fortunately, we have our record under the Chancellor, who is in charge of the Treasury, and that under the right hon. and learned Gentleman when he was an economics Minister in the last Conservative Government. Let us compare them and see who was inept and incompetent and wasted money. Under the Conservatives, when he was an economics Minister, we had 15 per cent. interest rates. When he was Employment Minister, there were a million extra unemployed, a million people in negative equity and £80 billion of Government debt. Under the current Chancellor, we have the lowest interest rates, inflation and unemployment for decades. A million and a half more people are in work.
	Let me say one other thing: whatever we have done, none of us has introduced anything as bad as the poll tax. The right hon. and learned Gentleman introduced that, as well as giving us 15 per cent. interest rates and opposing the minimum wage. Same old people, same old policies, same old Tories.

Michael Howard: Let me make it clear that I am happy to debate the past with the Prime Minister any day he likes. I have a big dossier on his past, and I did not even have to sex it up. We can talk about his personal pledge to leave the European Union or the time when he criticised America's "state sponsored terrorism"—I wonder whether he will raise that with President Bush next week. We can talk about the time when he praised the "fortitude and resolve" of the Wapping strikers. I bet that he does not remind Rupert Murdoch of that.
	I am happy to debate the past with the Prime Minister any day of the week, but I rather think that the British people are more interested in today and tomorrow than in yesterday. We will take every opportunity to remind them of his discredited Government's failures today.

Tony Blair: I am very happy to debate today with the right hon. and learned Gentleman. For example, let us consider what has happened in his constituency, where 11 schools have benefited from the new deal for schools funding that he has pledged to scrap. The number of five, six and seven-year-olds in classes of more than 30 has fallen from 12,000 to 249. We have had the best results ever for primary schools, GCSEs and A-levels, and all the waiting times are down. That is precisely the difference: this party is putting money into our public services and getting results in every constituency in the country. The right hon. and learned Gentleman does not simply represent the past—he would take us back to the past.

Adrian Bailey: In view of the timely visit by President Bush to these shores, will my right hon. Friend take the opportunity to raise with him the issue of the illegal US steel tariffs, the decision by the World Trade Organisation on Monday on the legitimacy of retaliatory action and the implications that the continuation of the US policy would have on world trade?

Tony Blair: My hon. Friend is right to raise the issue of the steel tariffs. It is a subject that we have raised with the American Administration constantly, particularly following the WTO ruling. It is important that that ruling should be complied with and that the steel tariffs should be lifted. My right hon. Friend the Chancellor will be meeting the US Treasury Secretary next week to talk about these issues. I hope, incidentally, that if we can get a resolution of this issue between the European Union and the United States, it will give us some momentum towards restarting the World Trade Organisation talks, which are immensely important for Europe, America and the wider world.

Charles Kennedy: Staying on the subject of President Bush's state visit next week, presumably the Prime Minister will raise with him the continuing indefensible situation of the British citizens being held in illegal limbo at Camp Delta. Will the Prime Minister confirm that he will raise that issue with the President, and can we now expect a positive outcome to it, once and for all?

Tony Blair: We have been in discussion with the American Administration about this issue for several months, and I hope that we can resolve it quickly. It is important to ensure—in the way that I have indicated to the right hon. Gentleman before—that it is resolved on the basis of a proper trial being held in respect of these people, any of whom can be charged. If that cannot be done, it is important that they should be returned. I do not want to say any more at this stage, other than that we are trying to resolve the situation, and that it is important that we do so. I hope, however, that the House and the country also take account of the fact that this situation—which I agree is exceptional—arose out of the situation in Afghanistan and out of a conflict in which British troops were involved. As well as ensuring that people get a fair trial, it is also important to protect the security of this country.

Charles Kennedy: We hope that the Prime Minister will achieve an acceptable outcome next week in the discussions that take place. Presumably, he will also discuss with the President of the United States the deteriorating situation in Iraq. The administration of that country is clearly in a state of crisis, the attacks on allied troops have escalated dramatically, the Red Cross has been forced to scale down its presence, and the American administrator has now been recalled to Washington for urgent talks. As the leading partner with the Americans in this situation, what input are the British Government having to those talks?
	After the state visit next week, will the Prime Minister undertake to come to the House personally to make a statement and to take questions on exactly what was discussed and what conclusions were arrived at?

Tony Blair: I am very happy to keep the House informed as to the state of the discussions, both on Iraq and on other issues. Let us be very clear as to what is happening in Iraq. Yes, there are tremendous difficulties—there are bound to be, when terrorist groups and former members of Saddam's Government are prepared to kill any number of innocent people. The American and coalition forces are not trying to bomb the UN out of Baghdad, bomb the Red Cross out of its compound or ensure that ordinary innocent Iraqis are killed, as these people are doing. Of course it is difficult, but the implication of the right hon. Gentleman's questioning and of some of the comment that I read is that because Iraq is difficult, we should somehow get out and withdraw from the position that we are in. Well, I think that that is the worst thing that we could possibly do. We have got to stick with this and see it through. Our dialogue with the US Administration is constant at every level on this issue. It is important that we stick with this, because the reality is that we are the ones who are trying to make the lives of ordinary Iraqis better, and these terrorists and Saddam supporters are trying to stop us. That is the reality, and we should not forget it.

Patrick Hall: Does the Prime Minister agree that if a political party were to promise patients' passports, pupils' passports—[Interruption.]

Mr. Speaker: Order. Let us hear what the hon. Gentleman has to say.

Patrick Hall: If a political party were to promise to spend more on all public services and to pay for that by cutting tax, might it not stand accused of trying to con the British people into believing that it is possible to get something for nothing?

Tony Blair: rose—

Mr. Speaker: Order. The hon. Gentleman is asking questions that the Leader of the Opposition is qualified to answer. Next time I call him, he should have a better question to ask.

Annette Brooke: Is the Prime Minister aware of cases such as one in my constituency involving someone who, having had breast cancer surgery on 9 July, had to wait until the end of October to begin radiotherapy? Is he concerned about the current national shortage of radiographers? Has there not been a lack of joined-up action by Government to secure improvements in all stages of cancer treatment?

Tony Blair: I am sorry about the difficulties experienced by the hon. Lady's constituent, but it is important to recognise that there have been substantial improvements in cancer care over the past few years. The number of cancer specialists and MRI scanners has increased. Whole new cancer wards have opened. There has also been an increase in overall provision running into hundreds of millions of pounds.
	It is true that we still have a problem with the number of radiologists and radiographers, which is why we are substantially increasing the number of people in training. Training them takes several years, but we are considering how we can increase the number. Once we have solved that problem, we shall have closed the biggest gap between the cancer care system that we have and the one that we want.
	Let us be in no doubt about one thing: if we compare the present position with that six or seven years ago, we see that not only are cancer deaths down by some 10 per cent. but the service as a whole has improved immeasurably as a result of our extra investment.

David Taylor: The Forensic Science Service is a hugely successful publicly owned organisation with an unmatched international reputation, but our Government, in their garage-sale privatisation drive, are putting this national treasure under the auctioneer's hammer. Does the Prime Minister understand why so many Labour Members feel unhappy about that and that we cannot stand by as mere silent witnesses?

Tony Blair: I do not entirely recognise the policy from my hon. Friend's description. What is important is enabling the Forensic Science Service to attract private money and investment. This is all about improving the service, which plays an enormous part in combating crime. We must consider how we can run it and similar services more effectively, and secure more investment for them, both public and private.

Michael Howard: Why was it necessary for the Prime Minister's spokesman to say yesterday that the relationship between the Prime Minister and the Chancellor continues to be one of the great strengths of the Government?

Tony Blair: Probably because he was asked the question.

Michael Howard: If the answer is true, why was that legendary peacemaker the Deputy Prime Minister brought in to mediate between them? Is it not an absolute disgrace that while the people of this country are feeling so let down over schools, hospitals and crime, the Prime Minister and the Chancellor of the Exchequer spend their time squabbling over who should sit on the national executive committee of the Labour party?

Tony Blair: Is it not extraordinary that the right hon. and learned Gentleman, with the record that he had in government, actually turns round and attempts to say that people in this country are suffering today under the Chancellor? If they are suffering under the Chancellor, what was it like when a million people's homes were repossessed through negative equity? What was it like when we had a million extra unemployed when he was Employment Secretary? What do the Conservatives think it was like when people experienced 15 per cent. interest rates?
	A moment or two ago, Mr. Speaker, when you rightly disallowed the question from my hon. Friend the Member for Bedford (Mr. Hall), it was interesting to note the Opposition's reaction to any discussion of their patients' passport policy. If we are talking about the national health service, what would be a disaster for people in the health service today is to be forced to top up their treatment with a voucher that would cost thousands of pounds for basic health care, which would mean that ordinary people in the health service did not get that care. It is not just the right hon. and learned Gentleman's record in government that we will be discussing; it is his policies now, because they are just the same as the policies that brought disaster before.

Ian Cawsey: May I draw my right hon. Friend's attention to the dreadful house fire in Goole in the early hours of this morning, which sadly claimed the lives of three children under the age of six? The fire was of such intensity that firefighters' equipment melted and two firemen were injured. Will he extend his sympathies—as the whole House doubtless does—to the family concerned, and once again praise our emergency services for their excellent efforts in deeply harrowing circumstances?

Tony Blair: I am happy to join my hon. Friend both in offering our sympathy and condolences to the family in his constituency and in praising the emergency services, which, in that incident as in so many others, did a fantastic job on behalf of the people of this country.

Andrew MacKay: Who does the Prime Minister believe would make a better Mayor of London, Ken Livingstone or Nicky Gavron?

Tony Blair: Of course, I always support the Labour candidate.

Colin Burgon: My two recent experiences of participating in planning public inquiries that affect my constituents in Bardsey and Methley and in Allerton Bywater, have confirmed my belief that such inquiries are the natural domain of highly paid barristers, employed by powerful commercial interests. They talk in a language, and use procedures, that ordinary people do not understand. Is it not about time that we looked at democratising the public inquiry system, thereby giving the public a real voice in the system?

Tony Blair: On the first part of my hon. Friend's question, I suspect that he may have found something that the Leader of the Opposition and I agree on. On the second part, we are of course going to introduce measures to change the planning system. I entirely agree that it is important to ensure that it is far more effective than it is currently, and that it distinguishes far more clearly between the cases that merit being considered for a long time and those that should be handled quickly. We have got to understand that one of the biggest brakes on our ability to develop brownfield sites is the slowness of the planning system. For that reason, it is important that the measures that we are introducing are supported, and I take it from what my hon. Friend is saying that they are coming not a moment too soon.

Andrew Selous: Does the Prime Minister agree that local people and local councillors are best placed to decide on local issues, as their not doing so undermines local democracy and causes resentment? Given the enormous impact of the Milton Keynes and South Midlands study on South Bedfordshire, will he please ask the Deputy Prime Minister to accept South Bedfordshire district council's invitation for him to visit the area to reassess these proposals?

Tony Blair: I will certainly pass on to the Deputy Prime Minister what the hon. Gentleman has said. It is of course important that we consult local people about these plans, and it is also important that we get plans that are right for the whole of the region, rather than for a particular district on its own. That is why I have no doubt that South Bedfordshire district council will be consulted in the normal way.

Jane Griffiths: The Prime Minister will know that the Department of Health has allocated £2.6 million to Berkshire under the choice initiative, which is drastically reducing waiting lists. Does my right hon. Friend share my optimism that even if we have a flu epidemic this year, waiting lists will continue to reduce? Does he share my dismay at Conservative party policies on spending?

Tony Blair: I can certainly tell my hon. Friend that the policies of extending choice and building capacity within the health service will continue. When we came to office, many people were waiting up to two years for their operations. Now there is a maximum time of 12 months and very few people wait longer than nine months; we are going to progress to six months by 2005 and, if given the chance, to three months as the maximum wait by 2008. All of that comes only with the extra investment going into the national health service. On the basis of the recommitment that we have seen over the past few days to the policies of the previous Conservative leader by the shadow Chancellor and the new Leader of the Opposition, I can say that this issue will run and run. There will be a clear choice between those who want to rebuild the health service and those who want to get their hands on it in order to destroy it.

Angus Robertson: Given the importance of the Scotch whisky industry, is the Prime Minister concerned that the ongoing crisis following Diageo's redesignation of Cardhu single malt is undermining the standing of that industry? Does the Prime Minister support ongoing cross-party efforts in the all-party Scotch whisky group to find a solution and enhance the good name and reputation of this important product at home and abroad?

Tony Blair: I understand the point that the hon. Gentleman is making. To be frank, I am not an expert on how whisky is designated as opposed to drunk. It is true that we have frozen the duty on whisky for many years, which is important. As to the redesignation of Cardhu, I shall look further into it. I am not entirely sure that it is a matter for the Government—at least, I sincerely hope that it is not—but I will certainly study the comments of the all-party Scotch whisky group.

Peter Pike: The Prime Minister will know that the two key difficulties that Burnley has faced over the past couple of years have been 4,000 empty houses and problems in our secondary schools. Lancashire county council has a bid in to deal with the secondary school problems and has the vision to provide improved secondary education opportunities for all our children. During next month, under the Government's housing pathfinder renewal project, Elevate will put in a bid for the programme next year. Does the Prime Minister recognise the importance of ensuring that we receive a favourable answer from the Government to demonstrate that a Labour Government working together with Labour councils is the best way of solving Burnley's problems?

Tony Blair: My hon. Friend is making two points. First, on housing renewal, it is the case in some areas, particularly in constituencies such as his, that we have the opposite problem from that in the south-east, where there is pressure on housing and a desire to have more houses. In parts of the north-west and other parts of the north we have houses for which, frankly, we no longer have a proper use, and there is no market for them. That is why a housing market renewal fund of some £500 million has been established. I know that that will in part benefit my hon. Friend's constituency.
	What my hon. Friend says about the school system is important. Some 41 bids are currently being considered for extra capital investment in schools. The decisions will be taken shortly, but it will mean something in the region of £2 billion extra in capital investment for schools in this country.

Nigel Waterson: If things are going so well in the NHS, can the Prime Minister explain why my local hospital faces a deficit this year of £7 million or more? Can he give me a personal assurance that the pressure being brought to bear to tackle that deficit will not prejudice waiting times, waiting lists or patient care generally?

Tony Blair: I can certainly give the hon. Gentleman the commitment that it is important that the pressure on the deficit should not imperil the waiting lists and waiting times. I hope, however, that he recognises that in the past few years those have been falling substantially in his area and in other constituencies. The fact of the matter is that there is not a single in-patient or out-patient national indicator that is not in better shape today than it was six years ago, in 1997. As for the deficit, it is true that certain hospitals have deficits. They can carry them, obviously, but we are in discussions with them about it. But let us be clear: the implication of the hon. Gentleman's question is that we need even more money in our national health service, and I have to tell him that whereas Labour is committed to putting in that extra money, his party is committed to taking it out. That, I am afraid, is, was and will be the crucial difference between the two parties.

Oona King: May I turn the Prime Minister's attention to the review of local government finance? Many of us hope that it will make council tax fairer for pensioners and people on small fixed incomes. Can he assure us that, whatever the outcome, it will not have "something of the night" about it and will not return us to the nightmares of the past that have recently been haunting us?

Tony Blair: I can simply assure my hon. Friend of this: the review will consider many things, but one thing that it will not consider is a return to the poll tax.

Iraq (Reconstruction)

Hilary Benn: With permission, Mr. Speaker, I wish to make a statement on progress on reconstruction in Iraq.
	As hon. Members are all too aware, security is a continuing concern, particularly in and around Baghdad. US forces are bearing the brunt of these attacks, but the UN and international aid agencies are also being targeted. I am sure that the whole House would wish to join me in condemning the recent bombing of the International Committee of the Red Cross and this morning's attack at the headquarters of the Italian military police in Nasiriyah, which has claimed a number of lives.
	Of equal concern have been the attacks on the Iraqi people themselves, including the assassination of Aqila al-Hashimi—one of only three women members of the governing council—who was shot the day after I met her in Baghdad. Regrettably, there have been other victims, including religious and civic leaders, judges and police officers, and ordinary Iraqis caught up in bomb blasts.
	Those who attack the Red Cross and Iraqis working to rebuild their country are desperate to stop reconstruction happening. We cannot let them succeed.
	In these circumstances, however, it is understandable and right that the ICRC and the United Nations should review their security procedures and the way they work in Iraq, even if that means temporarily pulling back on some of their operations and pulling out some of their international staff. We stand ready to help them to finance additional security measures, where appropriate, to try to limit the effect on their capacity to help with reconstruction. We will continue to support those agencies, their local staff and the non-governmental organisations still working in the country.
	However, that is only part of the picture. Political violence is largely concentrated in one part of Iraq: Baghdad and its surrounding areas. The situation is more stable in the northern provinces, and in the south-east, which I visited in September. Security is being maintained by the UK-led multinational division and the local police.
	For most Iraqis, life is gradually improving. Last month, electricity supply rose above pre-conflict levels for the first time, which has allowed much-needed maintenance to take place during the cooler months when demand is lower. Food distribution is working, and supplies will continue after the UN oil-for-food programme ends this month. In addition, 1,500 schools have been refurbished; 70 million new textbooks are being distributed and attendance rates are back to pre-conflict levels. Fuel supply for domestic consumption is meeting demand. Almost all Iraq's 240 hospitals are now in operation and routine immunisation of children has resumed.
	Clean water supplies are improving in much of the country, with sewerage plants being rehabilitated. Forty thousand Iraqi police officers are on duty. They are being trained and equipped. Criminal justice is being restored, but without the terrible repression that characterised Saddam's regime; and 170 newspapers are now on sale in the streets, enabling Iraqis to express their views freely.
	As well as recognising the enormous contribution of the Iraqi people to these achievements, I want to take this opportunity to pay tribute to the skilled and dedicated work of UK forces and of other UK nationals, both in southern Iraq and elsewhere, for their courage and for their determination to help Iraq to rebuild itself.
	Progress is also being made on the political and constitutional process, with a healthy debate under way on how best to create a genuinely representative system. UN Security Council resolution 1511 expressed support for this process and asked the UN to strengthen its role as far as circumstances allow. It also asked the governing council to set out by 15 December a timetable for the electoral process. This will provide the context for decisions about the transfer of executive and legislative authority, recognising that the coalition's aim has always been to hand Iraq over to its people as quickly as possible so that they can have control of their own political destiny.
	Iraq's Ministers, appointed at the beginning of September, are taking increasing responsibility for developing and implementing policies. The governing council has gained growing recognition internationally, including from the Arab League and the UN General Assembly. It played a prominent role at the annual meetings of the World Bank and International Monetary Fund in Dubai, and governing council members and Ministers made their presence felt at the Madrid donors' conference at the end of last month. That conference raised pledges of at least $33 billion in grants and soft loans in the three years up to 2007, significantly exceeding expectations. Seventy-three countries participated, underlining the breadth of international support for securing a better future for Iraq.
	In Madrid, I set out our commitment to reconstruction in Iraq with a pledge of £544 million. This includes the £209 million that the Department for International Development has already committed for humanitarian and reconstruction assistance, and £296 million over the next two years. We are considering how best to use this funding to support reconstruction, development and poverty reduction.
	The pledges raised in Madrid, alongside oil revenues, foreign direct investment and commercial loans, are expected to meet Iraq's investment needs for the next four years. I can also tell the House that agreement has now been reached between the UN, the World Bank and the coalition provisional authority on the terms of reference of the international advisory and monitoring board, which will oversee the use of Iraq's own resources being channelled through the development fund for Iraq.
	The Iraqi people deserve the chance that they now have for a better future; they have waited for it long enough. Much remains to be done on security to counter the violence of Saddam loyalists and others who want to deny the Iraqis this chance, but the best way we can prevent them from succeeding is to continue with reconstruction and political change. As I am sure that the House will agree, that is why we must all remain committed to the economic and social reconstruction of Iraq and to a better life for its people.

John Bercow: I am grateful to the Secretary of State for his statement and for his courtesy in providing me with advance sight of it.
	I shall begin on a consensual note by echoing the Secretary of State's condemnation, expressed on behalf of hon. Members of all parties, of the despicable terrorist acts that have been committed. Their purpose is to prevent reconstruction and a return to normality. They must not be allowed to achieve that purpose. I also endorse the glowing and justified tribute that the right hon. Gentleman paid to our troops and to the other British nationals who are working day after day in the public interest of the people of Iraq. We recognise and applaud that work, and hope that it will continue. Of course, some good work has been done, and the Secretary of State is entirely entitled to draw attention to the successes that have been achieved in relation to schools, hospitals, water cleanliness and so on. But we are the Opposition, with a responsibility constructively to probe, and I have a number of points to put to the right hon. Gentleman.
	First, the Secretary of State referred with approval to the growing recognition of the governing council's work. I was pleased to hear what he had to say, but I ask him to tell the House how that squares with press reports about the evident dissatisfaction of the Bush Administration with the governing council, by which they are frustrated and which they believe to be divided and incapable of making the necessary decisions within the required time scale.
	Secondly, the right hon. Gentleman will know that when the Foreign Secretary was asked on the "Today" programme this morning what he would like to see come out of the emergency talks in Washington between Ambassador Bremer and White House officials, the Foreign Secretary replied:
	"I am not party to the talks, nor party to his return".
	Why is Her Majesty's Government not party to those talks, given that HM forces are in southern Iraq, where security is, to put it mildly, highly precarious? Would it not make sense for us to be fully consulted? What kind of message does that send, ahead of President Bush's visit to the United Kingdom? Will it not seem as if he is coming here to tell the Prime Minister what will happen in Iraq, rather than to discuss with his staunchest ally what can most usefully be done to increase security and provide for reconstruction?
	How can the Secretary of State explain or justify what his right hon. Friend the Member for Birmingham, Ladywood (Clare Short) described as "poor preparations" for post-conflict Iraq, given that on 24 September 2002 the Opposition, in the form of my right hon. Friend the Member for Devizes (Mr. Ancram), the shadow Foreign Secretary, underlined the need for a comprehensive plan for securing a new Iraq? We underlined that point on 15 October, 8 December, 16 December, 20 January, 21 January, 27 January, on 30 January, and—yes, Mr. Deputy Speaker, you can guess what comes next—a host of other occasions that time does not permit me to list today.
	On 3 February, the Prime Minister tried to reassure the House that
	"We are well aware that we must have a humanitarian plan that is every bit as viable and well worked out as a military plan". —[Official Report, 3 February 2003; Vol. 399, c. 36.]
	That is on the record—but we, and millions of other people, see no evidence of the existence of such a plan.
	Moreover, our suspicions were confirmed on 28 October when Sir Jeremy Greenstock, referring to attempted reconstruction, admitted:
	"There was a slow start, and we are now trying to catch up on that".
	Why does the right hon. Gentleman not undertake, in the public interest, to publish the Government's original post-war plan so that we, and others, can judge for ourselves how well or badly prepared the Government were? I call on him to give that commitment today.
	On 8 November the Red Cross announced that it would temporarily close its offices in Baghdad and Basra. That followed similar decisions by Médecins sans Frontières, Save the Children and Oxfam. What confidence does the Secretary of State have—I hope that he does possess such confidence—that conditions will improve sufficiently to allow their safe return, and within what time scale does he expect that return to take place?
	The Secretary of State again referred, with alacrity, to the Madrid conference last month and the plan for reconstruction outlined there. However, I must return to a crucial theme of concern to millions of the most vulnerable people in the world—the plight of those 140 million people living in poverty in middle-income countries. The Prime Minister said on 25 April that help would continue to be provided for those people, and that they would not be expected to pay the price or foot the bill for Iraq's reconstruction.
	The Secretary of State's written ministerial statement on 14 October made no mention of imminent cuts to much-needed programmes; such news was provided only on 6 November, less than a week ago. In the light of the decision that he has made, I think I am entitled to ask the right hon. Gentleman precisely which, and how many, needed projects will suffer, how development will be retarded, and what estimate he has made of the numbers of those who will suffer as a consequence?
	A specific point of concern to many people is the prospect of re-establishing the spinal injuries unit. The right hon. Gentleman will be well familiar with that, and will know that it was blown up when United Nations headquarters were bombed. The Opposition, in the form of my hon. Friend the Member for Meriden (Mrs. Spelman), the former shadow Secretary of State, have repeatedly asked for some Department for International Development funding to be made available to help with the re-establishment of that vital unit. To date and to my serious regret, the Government have refused to take that simple but practical step, which would not only bring immediate relief to sufferers, but show the people of Iraq that we were genuinely committed in practical terms, through deeds as well as words, to their successful and secure future.
	May I conclude by saying to the Secretary of State—whom I regard it as a great privilege to shadow—that no hon. Member doubts the decency of his intentions, but many people in the House and throughout the country doubt the capability of the Government to deliver in deeds what they have promised in words? On the strength of the track record to date, it is difficult to escape the conclusion that, while Ministers prevaricate in Westminster, the people of Iraq are desperately trying to get on with their lives. Is it not the truth that, whereas the Government, notably in the form of the Prime Minister, displayed courage and statesmanship in the conduct of war, the reality is that they have been guilty of dither and abdication of responsibility in failing to prepare for the peace?

Hilary Benn: I welcome the hon. Gentleman on his first appearance at the Dispatch Box on a statement. I am sorry about the way that he ended his observations and his legitimate questions, to which I shall endeavour to respond, because no hon. Member listening to what I have described and the discussions and statements that we have had previously on Iraq could doubt the Government's determination—indeed, the determination of hon. Members on both sides of the House—to try to get this right.
	I also welcome what the hon. Gentleman said about our forces and our staff, because it will be much appreciated by those people, who are working very hard, and his condemnation of the attacks—the result of the work of those who frankly will stop at nothing to try to undermine the process.
	On security, I think the hon. Gentleman will recognise that while it is the case that life for ordinary Iraqis is getting better and their security is improving, for the coalition forces, the international aid agencies, the UN and the Red Cross, the security situation is getting more difficult. Those two things are happening at the same time.
	On the governing council, as the hon. Gentleman will be aware it came together from a disparate group of people, some from outside the country and some who had remained throughout the Saddam years. It is finding its feet. Its members are getting to work together and they represent a range of interests. In taking the first steps towards establishing democracy in Iraq, we have to start somewhere, and it was entirely right and proper to bring together a group of people with a range of interests who represent different parts of that complex country.
	All I would say in describing what I saw of the governing council's members in Madrid is that their confidence and authority are increasing as they are getting involved in the work of taking decisions, in consultation and discussion with the coalition provisional authority, about the future of the country. As the hon. Gentleman will recognise and as my right hon. Friend the Foreign Secretary made clear on the "Today" programme this morning, a process is going on to work out how best to do that and increasingly to transfer responsibility to Iraqis. That is the subject of continuing high-level consultation between the United Kingdom and America.
	On preparation, we have already set out the steps that we took to prepare for the outcome of the conflict. As the hon. Gentleman will probably be aware, DFID, in particular, rightly prepared for the potential worst outcome—a humanitarian crisis—so all the things that we put in place were in anticipation of that because, frankly, if we had failed to prepare for that crisis, we would have been rightly criticised. Thankfully, that did not arise because the conflict was very short.
	I accept what the hon. Gentleman says about the start of reconstruction having been slow, but all I ask him to acknowledge is that real progress has been made, and I simply ask those hon. Members—including the right hon. Member for Devizes (Mr. Ancram)—who have said that swift enough progress is not being made to acknowledge that we have seen real progress, particularly in the past couple of months.

Julian Brazier: What about the planning?

Hilary Benn: In a sense, never mind the planning when we can see the product of the improvement that results from the work that has been done and the planning that has taken place at every stage. So look at the evidence of the progress.
	On the position of the Red Cross, I cannot say what the timetable might be for the return of the Red Cross's international staff. That is a decision for the Red Cross and other agencies to take on the basis of their assessment of the security position. What the House needs to remember, however, is that a considerable number of Iraqi staff of the international agencies, including the Red Cross, are continuing to work in Iraq. That is why the reconstruction work continues. It has an effect, but the Iraqis who work for those organisations, and the Iraqis in the Ministry of Health and others, are getting on with the job. That is why I hope that the reconstruction process will continue, and the evidence suggests that that is the case.
	On the spinal injuries unit, about which the hon. Gentleman rightly says that his predecessor was very concerned, he may or may not be aware that the Ministry of Health and the CPA have undertaken to carry out repairs to it, which I am advised will create 30 beds. Our work through the World Health Organisation and others is to build the establishment of primary care, because, ultimately, we must focus our efforts somewhere. I understand the importance of the spinal injuries unit, and I am pleased to be able to report to the House that, as a result of representations made by ourselves and others, that process will take place.
	On the middle-income countries, first, we made a pledge that Iraqi reconstruction would not affect humanitarian work or funding for emergencies, and it has not done so. Secondly, as was touched on in oral questions, it has not affected middle-income programmes this year, and the great bulk of the money for Iraqi reconstruction has not come from that source. In any event, we were committed to the change of moving to 90 per cent. of our bilateral funding being allocated to the poorest countries. I think that that is the right policy, and I hope that the hon. Gentleman will support it. My other point is that it would be a mistake to look at Britain's support for middle-income countries solely in terms of our bilateral programme, as we make a very significant investment through the EU and the multilaterals. In Latin America, for example, the UK share of EC spending and multilateral spending in 2001, which is the last year for which figures are available, amounted to £68 million. A significant programme of work continues in those countries, including those from which we propose to withdraw—in most cases slightly earlier than we already intended to do, long before Iraq arose as an issue—and it is important that we recognise the contribution that the UK is making.

Tom Brake: I join the shadow Secretary of State in thanking the Secretary of State for providing an advance copy of the statement today. I also join him in condemning the attacks on Iraqi citizens, the Red Cross, UK and US troops, the Italian police, as we have heard today, and Iraqi governing council members. I, too, pay tribute to the work that is being done by the various organisations and forces in that region.
	First, does the Secretary of State agree that the best way of speeding up reconstruction in Iraq is to increase and bring forward the involvement of the UN? Can he set out why he believes that there is a better prospect of the pledges that have been made on Iraq being delivered than, for instance, the Tokyo pledges on Afghanistan, in respect of which I am afraid to say the money has not been forthcoming? Can he comment on the reasons for Paul Bremer's emergency recall and whether there are any implications for Iraqi reconstruction? Can he also set out whether there have been any discussions between his Department or other Departments and Paul Bremer about the prospect of British companies and companies from other countries being involved to a much greater degree in the projects that will be funded by the US?
	Can the Secretary of State comment on reports, to which the Conservative spokesman alluded, about the threat to the Iraqi governing council and whether it was going to be replaced by a Loya Jirga or something similar? What implications would that have for the reconstruction in Iraq, and what impact would it have on a timetable for elections and handover of sovereignty, which the Iraqi governing council is expected to deliver by 15 December? On an associated point, can the Secretary of State clarify exactly what Sir Jeremy Greenstock's role is in relation to Iraqi reconstruction? Does he in fact have a defined role? Can the Secretary of State comment on whether he has heard rumours of unhappiness associated with Sir Jeremy, and rumours that Sir Jeremy does not think that he currently has a particularly well-defined role in Iraq?
	On the question of the Red Cross, clearly, the Secretary of State is not able to provide us with a timetable as to when the Red Cross is likely to return, but can he comment on any parameters or criteria that it will require to be met before it can consider its return? One of the unintended consequences of the reconstruction of Iraq, which has already been alluded to, is the diversion of funds away from middle-income countries. Can the Secretary of State clarify whether any assessment of those projects, and the impact on them, was made before the diversion of funds was announced? Can he explain why those projects, which were previously deemed priority projects, are no longer so deemed? Does he believe, as I do, that people in Romania and Egypt, for instance, will find it hard to understand the reasons why they are having to pay for reconstruction in Iraq?
	Iraq's future clearly hangs in the balance, and I urge the Secretary of State to use his office to ensure that Iraq does not descend into chaos, which would be at great cost to Iraqi citizens.

Hilary Benn: I am grateful to the hon. Gentleman for his words on behalf of those who are working in Iraq and his condemnation of the bombings and attacks that have been taking place.
	In answer to the hon. Gentleman's first question, the best way to speed up the reconstruction process is to be able to maintain the rate of progress in improving the lives of ordinary Iraqis, as that builds confidence in the process and people feel that things are getting better, which they are. A second way is to ensure that there is a clearly defined political process that the Iraqi people can see has as its purpose the quickest possible transfer of responsibility for decisions about the future of their country—something that has been denied to them for 30 years under Saddam. That is what the discussions that continue to take place between ourselves, the Americans and the governing council are all about. In response to the hon. Gentleman's point about Sir Jeremy Greenstock, he plays an extremely important part and is a pivotal figure in precisely those discussions.
	On the question of pledges, it is for each country that has made a pledge to honour the commitment that it has given. I can speak only for the UK Government, and I assure the House that we intend to honour the pledges that we have given about the money that we will make available for the reconstruction of Iraq.
	On the so-called threat to the Iraqi governing council, a live political discussion about the political process is taking place, as my right hon. Friend the Foreign Secretary made clear earlier today, about how we balance the drawing up of a new constitution, the way in which that will be done, who will participate, and at what point it leads to elections. What the UN Security Council resolution, which was unanimously supported, achieved was international support for that process, and it is the job of the Iraqi governing council to report back by 15 December on exactly what should be the timetable for those different stages. That is the right process, because it is the Iraqis who should determine that and nobody else.
	On the Red Cross, I cannot tell the hon. Gentleman what criteria the Red Cross might use. It will depend on its assessment of the position. I simply point out to the House that the Red Cross is staying in the north of the country and it has said that the withdrawal is temporary.
	On reallocation, in relation to Romania and Egypt, to which the hon. Gentleman referred in particular, we had already planned to withdraw from those countries. There has been a real debate within DFID, long before Iraq, about what we add in the work that we do in middle-income countries. We used to have a programme in the Pacific, but we no longer have one because we have been concentrating our efforts on the poorest countries of the world—hence the commitment to get 90 per cent. of our spending to those countries by 2005–06. I repeat that I believe that that is the right policy.
	Finally, to return to threats to the Iraqi governing council, I simply say to the House that the threats to the Iraqi governing council about which I am worried are the threats from those who are trying to kill the people who are putting their lives on the line to try to give the Iraqi people the chance of a better future and who deserve the support of the entire House in that endeavour.

Ann Clwyd: My right hon. Friend is right that reconstruction in Iraq is continuing apace. I was there only a few weeks ago and saw exactly what was going on. There could be faster progress but the security situation, as he rightly described, makes it more difficult for reconstruction to happen at speed. The governing council should be given responsibility as the interim government of Iraq until there can be elections. Also, the Iraqis themselves should be given responsibility for security because they know the people, streets and places and could find those who are responsible for some of the atrocities that are being committed. May I urge my right hon. Friend to consider those matters because such progress would be right for Iraq? Although the Iraqis should be given responsibility for security, the coalition should stay in Iraq until its stability and security are secured.

Hilary Benn: First, I acknowledge the role that my hon. Friend is playing, both as someone who has been passionately interested in Iraq for many years and as the Prime Minister's special envoy on human rights. I agree with her entirely about the need to build the Iraqis' capacity to take responsibility for security as quickly as possible with, of course, the continuing support of the coalition forces. That is precisely the process that is taking place. The new Iraqi army is starting to emerge and the civil defence force, the border police and the facilities protection service are looking after the products of reconstruction, which some people have been trying to undermine and blow up. There are now 40,000 police on the streets and training is taking place, so it is no accident that several of the bomb attacks have been against the people who are training the police and the places where that is happening. The Iraqi people want security, and providing more police officers will help to produce Iraqi-led and Iraqi-owned security. That should reinforce the determination of all of us not to allow the people who are cynically trying to undermine the process to succeed.

Martin Smyth: I appreciate the concerns about the slowness of development, but could that be because of the speed of the success of the forces? Since we understand the problem of terrorism, I assure the Secretary of State that our sympathy is with the Iraqi people in these days. Has the west provided police trainers in the numbers that were wanted? There was an outcry last month about that, so why was there such delay? The Red Cross stands for the suffering servant and redemption, so we hope that the time will come speedily when it will return to where it was always needed. We welcome the continuing service of those in northern Iraq and elsewhere.

Hilary Benn: The hon. Gentleman is right to say that because, with hindsight, part of the slow start to the process was due to the speed with which the conflict ended—people expected it to go on for much longer and anticipated a humanitarian crisis that did not emerge. He is right about police training. Efforts are under way as we speak to get more police trainers into Iraq because that is an important way to help with training. We all wish the Red Cross every success in trying to protect its staff and making a judgment in due course about when it will be safe for its international staff to return. It has played a really important role in the country for many years and a significant part of the funding that we gave in preparation for the reconstruction was to back its work.

Alan Howarth: Does my right hon. Friend agree that the bombing of the UN headquarters in Baghdad on 19 August was not only a terrible tragedy in terms of lives lost and injuries caused, but dismaying because it led to the UN's decision, which was understandable enough, to withdraw its international personnel from Iraq? Surely it is important that there should be no perception that the UN has abandoned the field to terrorists and that it should be seen to be playing a full and authoritative role in Iraq during the period of reconstruction and transition. When does he expect UN international personnel to be back inside Iraq?

Hilary Benn: I agree with my right hon. Friend about the importance of the UN's role and about the degree to which that was recognised by several resolutions, including resolution 1511, which gave UN authorisation to the multinational force in Iraq. I think that hon. Members will find that the resolution says that, in recognition of the difficulties and risks that the UN faces because of the attack, its involvement should be as circumstances allow. The UN has an important role to play in supporting the process and, indeed, that was the work of Sergio Vieira de Mello before he was killed in the bomb blast in August. The UN, with the governing council and the coalition, plays an important part in discussions to reach decisions on how to take the political process forward because that would be the most significant contribution, alongside improving the lives of normal Iraqis, that would allow the process to succeed and maximise the chances of Iraq having the better future that it deserves.

Andrew Murrison: The Secretary of State has painted a fairly upbeat picture of progress in Iraq, which is understandable enough. However, he cannot deny that the security situation is deteriorating. I fear that we will not see much progress unless it improves. In that context, will he comment on moves to establish a British theatre internment facility to take over much of the work currently done by the American internment facility in Umm Qasr? Will he explain how the approach of such a British facility would differ from that of the American facility?

Hilary Benn: The House will probably be aware that the hon. Gentleman has recently returned from service in Iraq. I acknowledge his point about security, as I did when I replied to the hon. Member for Buckingham (Mr. Bercow), because two things are happening. First, there is no point in hiding the fact that the security situation has become more difficult for our forces and international aid agencies because those who are trying to undermine the process have become more adept at attacking those who are leading the reconstruction and more determined to do so. Secondly, however, life is beginning to get better for ordinary Iraqis. There are two different types of security in the country at the moment and we need to acknowledge that when forming a judgment about how things are going. The standards that would be applied in the internment facility would be in keeping with those that apply elsewhere and for which British forces are rightly well known.

Kali Mountford: The whole House will acknowledge that the Iraqi people suffered many hardships under Saddam before the conflict. The true measure of progress will be when a point is reached at which ordinary people feel that they are being delivered goods and services better than they were under Saddam, rather than by reference to plans that we made before the conflict. What progress is being made on achieving that? Although much has been said about the governance of Iraq, surely it is a sign of a truly civic society when governance happens locally. Has there been any progress on establishing such a society for local communities, districts and towns?

Hilary Benn: My hon. Friend makes an important point about the glue that holds a democracy together and makes it work. Many things are happening in Iraq because of the freedom that has become available, and the development of the free media is one example of that. As I flew over Baghdad, I saw satellite dishes all over the rooftops, although they were banned under Saddam. The meetings that I held in Basra were with members of the local governing council, the local women's organisation, the chambers of trade and commerce and representatives of journalists and writers. A lively process is taking place in which local government plays an important part, although it does not get much coverage or publicity. The House will want to try to get a balanced view of what is happening. Everyone acknowledges that there are security difficulties because we read about them every morning in newspapers and see them on our television screens. However, another story is that of the Iraqi people taking advantage of the opportunity that they have to build themselves a better life. It is important that we encourage them in all the work that we do. Although we make an important contribution, the Iraqi people's contribution to rebuilding their own country will make the difference.

Patrick Cormack: In view of the fact that continued close co-operation between British and American forces in Iraq and between the British and American Governments is essential to the safe reconstruction of Iraq, does the right hon. Gentleman think it appropriate for President Bush to share his thoughts with Members of both Houses when he is here next week?

Hilary Benn: It is not my place to be drawn on that particular question. However, it is important that the dialogue between the UK and the United States is shared as widely as possible because, frankly, the responsibility is shared between all of us in this House and Congress as well.

Lynne Jones: When does my right hon. Friend envisage Iraq ceasing to rely on imports to supply such a large proportion of its fuel needs? Does he agree that it was always unrealistic to suggest that Iraqi reconstruction could be financed from its oil revenues? Does he also agree that support should be in the form of grants, not loans, with the occupying powers bearing the brunt of the responsibility for that burden?

Hilary Benn: Oil production is important to Iraq's economic future, as my hon. Friend knows. At the moment, oil revenue is used to support the process of reconstruction. The money goes into the development fund for Iraq and pays the salaries of teachers, doctors, police officers and others, many of whom receive higher salaries now than they did under the Saddam regime. One thing that needs to be done to improve oil production further is to ensure the continuity of the electricity supply to the pumping systems and refineries. That is why the sharp increase in electricity production over the past month and a half is so important. Iraq is also in a period of lower demand because of the colder weather. Further investment to increase production capacity to the target of 6,000 MW next year is important. In addition, we need to build up the security of the installations, infrastructure and pipelines. People are still trying to blow them up simply because they want to undermine oil production and the generation of revenue to support reconstruction. We need to do both those things.
	As far as grants are concerned, if we give the right support now, which is why the Madrid donor conference was so important, get the politics right and deal with the security problem, Iraq's wealth, the astonishing capacity of its people—it is a highly educated population—and its proud culture and history will enable the country to take off. The House should remember that, 30 years ago, gross domestic product per head in Iraq was the same as that of Portugal, which demonstrates how much the Iraqi people suffered under Saddam.

Paul Marsden: I appreciate the genuine sincerity of the Secretary of State's commitment to rebuild Iraq, but seven months after the supposed end of the war he admitted in a written reply to me on 22 October that there were still shortages of antisera, anti-cancer and local anaesthetic drugs in Iraqi hospitals. Will he urgently review the situation with a view to ensuring that full medical supplies get through to the Iraqi people?

Hilary Benn: I gladly undertake to do that. I discussed the problem with four of the UK staff seconded from the Department of Health who were working at CPA south in Basra. They told me that the solution is to get the distribution system right and for hospitals to anticipate when they are about to run short of drugs so that they place orders sufficiently in advance of that happening, so it is partly about systems. The Red Cross played an important role in that and its national Iraqi staff will continue to do that work.
	I shall look into the specific cases that the hon. Gentleman raised. Part of our funding has been used to support improved drug distribution. The Iraqi hospital system is recovering from the nightmare that it has been through. Iraqi doctors, nurses and other staff have worked hard to keep the system going. The hospitals now function and we must support them to ensure that they have the drugs that they need to provide the best service for their patients.

Helen Liddell: My right hon. Friend gave a welcome and balanced analysis of the situation, which I found greatly reassuring. People have inevitably concentrated on the public sector expertise available in Iraq, but there is considerable expertise in the private sector in the UK, not least among Iraqis who were exiled during Saddam Hussein's regime. What mechanisms exist to use that expertise? Is it realistic to use it now given the security situation in Iraq?

Hilary Benn: My right hon. Friend raises an important point about the long-term future of Iraq's economy, which was highly regulated with many state-owned enterprises. The real engine of reconstruction will be economic development, as is the case in many countries. It is important to make use of the resources and skills to which she refers. That process will take time. Economic reform must have regard to the circumstances that people are in now, including the unemployment level. One benefit of the reconstruction work, including the work funded by the UK, is to let contracts to Iraqi companies and to provide jobs for Iraqi workers. That helps to deal with the problem. In the long term, however, decisions need to be taken on the future structure of the Iraqi economy. It is my clear view that they should be taken by the governing council because they are so important for the country's future.

Archie Norman: While I in no way want to belittle the progress that has been made in rebuilding Iraq's infrastructure, is the right hon. Gentleman aware of the continuing decrepit state of the banking system? The Foreign Office still says that there is no way of getting cash to British citizens in Iraq, let alone foreign nationals or Iraqis, with the consequence that people like Mrs. Jones in my constituency cannot get money to her relatives. More serious than that, perhaps, is how hard it is for businesses to get funds to invest in Iraq and Iraqi businesses. The Foreign Office cannot offer advice on when the situation will change. Can the Secretary of State enlighten us?

Hilary Benn: I cannot, but I undertake to look into that problem and to get back to the hon. Gentleman. Many changes have taken place, including the successful currency transformation, which took up much time and effort. However, I understand the concern that he expresses on behalf of those who want to pass funds on to people in Iraq.

David Winnick: As one who fully supported freeing Iraq from Saddam's tyranny—that tyranny should be borne in mind by next week's demonstrators—I none the less have the feeling that not enough is being done to explain the objectives of the occupying forces to the Iraqi people. That plays into the hands of the terrorists and criminals. The mass media should be used far more in Iraq to explain what is intended because there is much misunderstanding, to say the least, in Iraq over what is to be done over the next few years.

Hilary Benn: My hon. Friend raises an important point. Having spoken about the satellite dishes that I saw on many Baghdad roofs, I suspect that they are pointed principally at al-Jazeera and al-Arabiya—

Chris Bryant: And BBC Parliament.

Hilary Benn: One would like to think that BBC Parliament was popular viewing in Baghdad and Basra. We live in hope.
	My hon. Friend the Member for Walsall, North (David Winnick) made an important point. It is the responsibility of the Iraqi governing council to explain the part that it plays in ensuring that the political process gives the Iraqi people the chance to take decisions on their future. I am sure he is right that more needs to be done on that front, in the same way as more needs to be done in the UK to give a more balanced picture of what is happening in Iraq today.

Hywel Williams: The Secretary of State will be aware of the dissolution yesterday of KADEK, the Kurdistan Freedom and Democracy Congress. That took place to facilitate the setting up of a new organisation that would be more democratic and decentralised, and untainted by the past. Does the Secretary of State welcome that positive move to allow Kurdish people to discuss matters with the dominant nation states in the area, and will he share with the House his thoughts on the value of greater decentralisation in Iraq and greater self-determination for the Kurdish people in the country's reconstruction?

Hilary Benn: I certainly welcome the opportunities for greater political diversity, discussion and free debate that are opening up in Iraq as a result of the disappearance of Saddam's regime. As for the hon. Gentleman's point about the way in which the country should be structured and run in future, my view is that that is a decision for the Iraqi people, which is why the constitutional process is such an important part of reaching a decision on the issue that he raised.

Chris McCafferty: I am grateful to my right hon. Friend for confirming that food supplies will continue after the oil-for-food programme finishes at the end of the month. However, will he also confirm the existence of an unpublished Bremer directive to end the public distribution system by June 2004? What is the Government's position on maintaining the public distribution system, which is clearly important for Iraqi welfare?

Hilary Benn: My hon. Friend has drawn attention to an issue that needs to be addressed. The fact that 60 per cent. of the Iraqi people were dependent on the food distribution system for their staple diet is an indication of the state of despair in which the country found itself. The fact that the public distribution system has continued to work effectively is important in providing stability while other reconstruction work takes place. Over time, however, the system will have to change, and discussions are taking place on the right form of system, the pace at which changes occur, and the way in which the system will eventually work. The most important thing in the course of those discussions is to ensure that there is no disruption in the availability of food. We shall apply that test to any decisions that are made.

Crispin Blunt: I am sure that the Secretary of State has read Simon Jenkins's article in The Times today which, if accurate, shows that his statement that there is a healthy debate about the political and constitutional process contains, unusually for him, more spin than substance. If the rest of Mr. Jenkins's analysis is correct, the fact is that there has been a catastrophic failure of British influence with the Americans in the past 15 months. The Foreign Secretary's statement today that he has not even been consulted on Mr. Bremer's talks with the Administration simply demonstrates that, with the Pentagon taking the lead rather than the State Department, and with the dismantling of the Iraqi army, some fundamental decisions have been made from which British influence was wholly absent. We are now in a position of having responsibility without power. Will the Secretary of State and the rest of the Government do their best to address the situation at which we have now arrived?

Hilary Benn: I have not read the article to which the hon. Gentleman referred, and I do not accept the description of the situation that he has just given.

Tom Clarke: In thanking my right hon. Friend for his comprehensive statement, may I ask whether he is aware of the concerns of the Kurdish representatives on the Iraqi governing council about northern Iraq? Those of us who have seen the tremendous transformation in health and education since the early '90s—there are now two universities, road infrastructure has improved and so on—share the view that that progress should continue. However, we also share concerns that have been expressed about neighbouring states and their objectives, and I would be grateful for his view on that. Is he convinced that the standing of northern Iraq and its boundaries and human rights are being respected by neighbouring states, including Turkey?

Hilary Benn: It is very important that all countries, particularly neighbouring states, act in a way that supports the political, economic and social process of reconstruction in Iraq. I am acutely aware of the position of the Kurdish part of Iraq, what it has gained from the protection provided in the past by the no-fly zone and the opportunities that have opened up with the fall of Saddam. It is important that we respect that, and that the Kurds play a full part in decisions within Iraq about the future structure of the country. One of the great merits of the governing council in the form in which it was established is that it recognised the Shi'a, the Sunni, the Kurds and the Iraqi Communist party in an effort to represent all the interests of the country, while acknowledging that Iraq is a complex country with a difficult history and that making decisions about its future governance will require much careful debate and discussion. I am sure that the process that is now in place will ensure that the Kurdish people and the Kurdish part of Iraq can play their part in reaching those decisions, because we want to build on what has been achieved.

Julian Lewis: Is it not precisely because this is such a complex situation that it is unfortunate that Britain is not being consulted when the Americans are making key decisions about what is to be done? The Secretary of State, as always, was comprehensive in his reply to the shadow Secretary of State, but he did not address the point about the Foreign Secretary or, indeed, any Government representative not being included in the discussions between the Americans and Ambassador Bremer? I think that the Secretary of State is old enough to remember what happened in the run-up to our withdrawal from Aden, when the security situation was coming under control, only for a premature announcement to be made that we were going to withdraw. That was intended to pacify people, but it encouraged the terrorists. It is important that we are not panicked into hasty action and that the Americans are not either. With our experience, there may be some things that we can usefully tell them about such a process.

Hilary Benn: I shall resist the temptation, because I would probably be ruled out of order, to discuss the experience of our withdrawal from Aden in 1967. Discussions are taking place all the time between all the parties in the process, including Ambassador Bremer, whom I met when I was in Baghdad and with whom Jeremy Greenstock has regular discussions. One should not confuse what appears in some newspapers with the reality of the debate. Everybody in the process should reflect on what has worked and what has not, and the way in which we can change what we are doing in response to changing circumstances. That is the sensible thing to do. As a result of those discussions, the Iraqi governing council will take decisions and make recommendations on 15 December that will chart the way forward.

Harry Barnes: Is my right hon. Friend aware that Saddam Hussein, like Adolf Hitler, had his people dragooned, incorporated and controlled by three mass organisations—one for women, one for young people and one for trade unionists? Now that those organisations are free to act, they are often in desperate need of office facilities, education and other provisions. The Foreign Secretary met the general secretary of the TUC and trade union leaders last week to discuss the situation of trade unions in Iraq, but what progress has been made in assisting those bodies, including organisations for women and young people, in playing a full role in the development of civic society?

Hilary Benn: My hon. Friend made an important point about the contribution that civil society can make to the rebuilding and reconstruction of Iraq. I can give him a practical example of support provided by the CPA in the south. Towards the end of September, I met a women's organisation in Basra that is being offered meeting space in the CPA headquarters so that it can come together to discuss issues in the town. It expressed appreciation to Sir Hilary Synnott, the head of CPA south, and me for giving them access to those facilities. It is important that we do everything that we can to encourage people who are bringing Iraqi civil society back to life, because it was cruelly repressed, as my hon. Friend said, under Saddam. That is an important part of rebuilding the country.

Richard Younger-Ross: The answer to the question asked by the hon. Member for Belfast, South (Rev. Martin Smyth) is that only two members of the police have been allocated. Although the Secretary of State did not say so, that was certainly the answer the last time that I asked. Will he expand on the restructuring of the power industry, particularly the rebuilding of power plants? I have asked before when that restructuring would begin, but I was given vague answers. No one would say when the contracts would be let or whatever. Will the Secretary of State tell us when they will be let, or are they still stuck in red tape in Washington?

Hilary Benn: I undertake to write to the hon. Gentleman to give him a comprehensive answer on the current state of play in relation to those contracts.

Joan Ruddock: My right hon. Friend will know that in post-conflict situations, violence against women escalates. Will he ask his officials to look at Iraqi micro-projects such as the Baghdad women's shelter that is being run by the Organisation of Women's Freedom in Iraq, and which is giving support to women escaping honour killings? Small grants to such projects could do much to save lives and to give Iraqi women more confidence in the coalition.

Hilary Benn: I gladly undertake to ask my officials to look at the project to which my hon. Friend refers. I will write to her, and perhaps we can discuss it.

Speaker's Statement

Mr. Speaker: Yesterday, the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) raised as a point of order a complaint about a letter that he had received from the editor of The Sun. He regarded that letter as a threat that would in effect be a breach of his privileges as a Member of Parliament. I promised that I would look into the matter. The hon. Gentleman will recall that we had already exchanged letters on this matter. As I have indicated to him, "Erskine May" records, on page 121, that
	"privilege applies in relation to obstruction of Members in the discharge of their responsibilities to the House or in their participation in its proceedings".
	It goes on to point out that
	"not all responsibilities assumed by Members fall within this definition".
	I have considered the matter carefully, and I can understand the hon. Gentleman's concern, but I am bound by the rules of the House relating to such matters, and I do not believe that the correspondence raises any issues on which I can intervene.
	May I point out to the House that complaints of breach of privilege should always be made to me in writing? The procedure for doing so is set out on page 144 of "Erskine May".

Clive Soley: I am grateful to you, Mr. Speaker, for that clarification, and for making it clear to the House that the issue is as it is. I never claimed privilege on the issue. I think that when a multinational newspaper organisation uses an editor to reply to a Member when they have not been involved in any discussions, it is right that the House should be aware of it. I am very grateful that you have placed that on the record in the way that you have.

Points of Order

David Wilshire: On a point of order, Mr. Speaker, of which I gave you notice earlier today. I can confirm that I have also drawn the matter to the attention of the Under-Secretary of State for Constitutional Affairs, the hon. Member for Shipley (Mr. Leslie).
	Yesterday, I received a letter from the Minister's diary secretary at the Department for Constitutional Affairs. It says:
	"I am writing to inform you that Christopher Leslie will be visiting your constituency on 12th November 2003 for the opening of the Criminal Justice Centre in Staines. The Minister will be present between 13.00 and 17.00.
	I would be grateful if you could send me any local information that you think will be relevant to Mr. Leslie's visit."
	Mr. Speaker, you are the guardian of the interests of Members of this House. In the past, you have said that it is unreasonable not to give Members sensible notice of a ministerial visit. I believe that 24 hours is inadequate; and it adds insult to injury when a Minister asks one to do his homework 24 hours before he makes the visit. A formal opening is not something that is conjured out of the air at 24 hours' notice. Is there anything that you can do to persuade Ministers to give Members of this House sensible, adequate notice when they visit constituencies?

Mr. Speaker: The hon. Gentleman has put it on the record that in his opinion 24 hours is not sensible notice, so whenever the hon. Member for Shipley (Mr. Leslie) appears, or tries to appear, in his constituency, he will give more notice. I would not like to lay down an amount of time that should be considered reasonable: it is up to individual Members to decide what they feel is reasonable in these matters. From time to time, I could do with a Minister visiting my constituency—perhaps I can put that on the record as well.

Andrew MacKay: On a point of order, Mr. Speaker. You will have noticed that in the newspapers today, and on the radio yesterday and today, there have been very serious allegations about the Minister for Children. A threatening letter that she sent to the chairman of the governors of the BBC has been published, in which she slurred the whistleblower in the child abuse scandal in Islington. Has she asked you if she can make a personal statement from the Dispatch Box? If not, she should, because it is an abuse.

Mr. Speaker: That may be the right hon. Gentleman's opinion, but there is no need for the right hon. Lady to make a personal statement. It is not a matter for the Chair.

Brian White: On a point of order, Mr. Speaker. May I draw to your attention the latest Liberal Democrat money-raising scam? I am not often speechless, but on Monday my local Liberal Democrat council presented me with a bill for £63 for taking up the case of a woman whose friend's daughter had died. Will you make it clear to the Liberal Democrat administration how seriously you view any interference with the work of a Member of Parliament, and suggest that they make an apology in their next Focus newsletter?

Mr. Speaker: I am glad to hear that the hon. Gentleman's council has accepted that a mistake has been made in trying to charge him for a legitimate inquiry on behalf of a constituent.—[Interruption.] Order. I do not think that it is necessary for me to comment further, except to say that I hope that Glasgow city council reads Hansard.

Constitution for Europe (Referendum)

John Maples: I beg to move,
	That leave be given to bring in a Bill to make provision for holding a binding referendum on any Treaty establishing a Constitution for Europe before any Bill relating to the Treaty is presented to Parliament.
	I do not know how many Members of this House are aware of just how enthusiastic the Government are about referendums. If we were all taking part in a session of "Who Wants to be a Millionaire?" and Mr. Tarrant were to ask us how many referendums the Government have introduced since 1997, I suspect that I am the only person who would get the answer correct—it is 34. We have had a staggering number of referendums. The Government are referendum junkies—except on the most important issue that faces this country at the present time.
	Of the other 14 countries in the European Union, six are committed to holding a referendum and two—France and Italy—are debating the matter extremely seriously. The French Prime Minister has said that there should be a referendum, and Mr. Chirac has instituted a consultation process. France held referendums before, in 1972 and 1992. The United Kingdom Government are so worried about what the French Government are doing that our diplomats in Paris are apparently lobbying them not to hold a referendum because it would be extremely embarrassing to the Prime Minister. Yet polls show that 80 per cent. of people in this country—even in Sedgefield and among trade unionists—want a referendum, and that demand is growing. If France and Italy were to sign up to referendums, it would be unstoppable.
	We have had a mass of referendums—some on very important issues such as the Scottish Parliament and the Welsh Assembly, and some on trivial issues such as whether Hartlepool should have a mayor—but apparently we cannot have one on this. We had one on the Good Friday agreement, which is a reasonably close parallel in that the constitutional arrangements for governing Northern Ireland were changed and the approval of its people was sought.
	I wonder how many Members of the House—or indeed, of the Government—are aware of the very first sentence of the draft constitution, which begins:
	"Reflecting the will of the citizens and States of Europe to build a common future, this Constitution establishes the European Union".
	How do we know that it reflects the will of the citizens of Europe if we do not ask them? It is a bit presumptuous to include such a sentence if there is no intention of holding a referendum.
	One of the canards that the Government put about is that the Conservatives support a referendum because they want a no vote so that they can get out of the European Union. That is not my view. I do not believe that one has to be in favour of the constitution and a never-ending process of integration to be a good European. A no vote in a referendum would tell the Government that people were not prepared to support the constitution and that the Government should negotiate a different constitution or a different relationship between this country and the EU.
	It is clear that the process of change is accelerating. From 1956 until the Single European Act in 1985, the treaty of Rome remained substantially unamended. However, there were only seven years between the Single European Act and Maastricht, five years between Maastricht and Amsterdam and three years between Amsterdam and Nice. It appears that there will be three to four years between Nice and the constitution. For 39 years there was almost no change to an economic community, yet in a few short years we have advanced substantially towards a united states of Europe. The direction is clear.
	I have much time for those who say, "I want to be part of a federal Europe." There is an argument for that and I can understand it. There is also an argument—with which I agree—that that is not the future of this country. However, there is no case for the people who pretend that what is happening constitutes nothing. The former Minister for Europe compared the constitution to the Beano and said that it did not introduce anything.
	On examination, one can find what bothers people such as me about the constitution. It contains some big changes—no one can deny that. Whether they are good or bad is another matter. It provides for a president, a foreign minister, a public prosecutor, a charter of fundamental rights, citizenship, legal supremacy, the sole right to make treaties, more Europol powers, a diplomatic service, stronger language on common defence, harmonisation of criminal law and procedure, and co-ordination of economic and employment policy. There is also the fact of its existence. The European Union already has a Parliament, a supreme court, a currency, a central bank, a common foreign and security policy and military capability. They may not constitute all the characteristics of a state but they amount to a great many of them. It does not need more to reach that point.
	The constitution collapses the pillar structure that Maastricht introduced so that there is no veto on justice and home affairs matters. That means a common policy, with qualified majority voting, on asylum, immigration and border controls. We will cede control over those matters to the European Union. The foreign affairs pillar, which has hitherto been kept as a separate intergovernmental pillar, will be compromised by the dual hatting of the foreign minister, who will be secretary-general of the Council and a commissioner. The Commission will thus get a role in foreign policy that it has not previously played.
	The pillar structure will go and there will be much more qualified majority voting, including on implementing foreign policy. There is a drive, which the Chancellor says that he will resist, to include social security and tax in qualified majority voting. Competition law is becoming an exclusive EU competence. We shall have no status in competition matters in the future.
	We have come a long way since 1956, when we all happily signed up to an economic organisation. I am happy with the Single European Act, which introduced the single market. However, no one then signed up to what we are now approaching. A referendum took place in the 1970s. Before the next stage in the process, the British people should be consulted; there should be a referendum.
	Perhaps there should have been a referendum on Maastricht. However, we had opt-outs from the two biggest items in the treaty—the social chapter and the single currency. Nevertheless, perhaps there should have been a referendum. Perhaps referendums should have been held on Amsterdam and Nice. However, the fact that there were no referendums strengthens rather than weakens the case for one now. It will not set a precedent. We have travelled an enormous distance since Maastricht. Since we did not hold a referendum then, it is imperative to have one now. At some point, people must be asked whether they want the process to continue.
	One may hold the view that our future is an increasingly centralised European Union. I believe that that will inexorably lead to a single state. That is a tenable view and I understand the people who hold it, especially those who are honest about it and advocate it openly. We may see our future as an independent state in a more flexible European Union, co-operating on an intergovernmental basis to advance common interests. However, the issue bedevils British politics. It bedevils politics between parties and within parties. [Interruption.] There is no point in pretending that the problem does not exist.
	The issue bedevils not only British politics between and within parties but British policy making. We have already witnessed that. For example, on defence, the Prime Minister is trying to do two incompatible things at once. He signed up to the St. Malo agreement and subsequently spent four years trying to ensure that European security and defence identity is pulled back into NATO. In the aftermath of the problems in Europe over the Iraq war, a little more leeway is being given on European defence. The Prime Minister must pull that back, too. We are becoming schizophrenic about the matter and that makes for bad policy. It is bad for the country because we are not clear about our destiny.
	I would vote no in a referendum, but I would accept a yes vote because the direction of the country and our public policy aims would then be clear. A no vote would also make matters clear. However, if we continue as we are, we shall have schizophrenia in policy making—trying to be in and out, a good European and a good Atlanticist. The dilemmas, whatever they are, will lead to confusion. The issue must be settled so that the policy direction is clear, and that can happen only through a referendum. The time and the issue are right. If the Government are so confident that they are right, let us have a referendum.

Chris Bryant: I am delighted that the hon. Member for Stratford-on-Avon (Mr. Maples) has given us an opportunity to debate the issue. However, I am saddened that he appears to have been hijacked by the extreme right of his party.
	I confess that I am not a big supporter of referendums. I believe that they are especially inappropriate when trying to deal with the intricacies of creating a treaty. Let us examine the facts. The draft constitutional treaty has 565 clauses, five protocols and two declarations. The vast majority are almost identical to those in previous treaties, but it is important to scrutinise the document line by line, clause by clause, not simply subject it to a question of yes or no. Although a referendum might be appropriate for "Pop Idol" when deciding whether Gareth Gates or Will Young should win, it is unsuitable for examining a treaty. That needs to be done with due diligence and only Parliament can do that. [Interruption.]
	Referendums in many parts of the world have often left countries and regions—[Interruption.]

Madam Deputy Speaker: Order. The hon. Gentleman is entitled to be heard.

Chris Bryant: Thank you, Madam Deputy Speaker. Referendums can render countries ungovernable. Let us consider California, where subsequent referendums were passed on a cut in taxes every year and on an annual increase in education spending. That made California almost ungovernable. I note that the policies are remarkably similar to those that Conservative Members are trying to advance—a miracle of increasing spending and cutting taxation—but I do not believe that the people of the world will subscribe to it.
	A principal problem with referendums is that, on the whole, people do not answer the question that is put to them. Let us consider the 1986 referendum in Spain on whether it should join NATO. I do not suppose that many Conservative Members wanted Spain to vote against joining. However, many people voted according to whether they liked the Government of the day, not on the issue. [Interruption.] I believe that we should hold referendums on only two conditions—[Interruption.]

Madam Deputy Speaker: Order. I have already asked that the hon. Gentleman be given the privilege of presenting his opposing view.

Patrick Cormack: On a point of order, Madam Deputy Speaker. May I cite one of the late Enoch Powell's points of order? He said that an hon. Gentleman is entitled to speak but not to be heard.

Madam Deputy Speaker: I shall not comment on that matter.

Chris Bryant: Thank you, Madam Deputy Speaker. The Conservatives are clearly in quite a state today.
	I believe that a referendum should be held only when the question is susceptible to a yes/no answer, and I maintain that this treaty is not susceptible to such an answer. Let us take article I.14. I believe that that article needs changing, and I hope that it will be amended. I am certain that the Government are trying to get it amended. But let us say that it stays in. Would that be the issue on which people voted yes or no, or would it be some other part of the treaty? Would people vote against the quotation from Thucydides that starts the treaty because they had hated Thucydides at school? Why would people vote? Would it put Britain in a better position, after a referendum, to argue for a stronger treaty on our behalf, or would it put us in a weaker situation because we would not know what we wanted?
	The first condition, then, is that if we are going to have a referendum, it should be susceptible to a yes/no answer. Secondly, it should be advanced only when a substantial change in how we are to be governed is being proposed. I would point out to the hon. Member for Stratford-on-Avon that the ink is not yet dry on the draft constitution document. I should like to quote someone that he might have heard of, who said a few weeks ago in the House of Lords:
	"I am concerned also that my own party . . . has so misled itself that it is ready at this stage to commit itself to a referendum on anything that may emerge from the constitutional Convention, not before the ink is dry but before half the wet ink has been put on it. We do not yet know what is going to emerge. It may prove to be an issue so dramatically different from those we have subscribed to in the past as to deserve that response. But I hope very much that my own party will consider carefully the wisdom of committing ourselves in advance to a referendum on this issue".—[Official Report, House of Lords, 9 September 2003; Vol. 652, c. 179.]
	That was no wild lunatic; it was the former Conservative Foreign Secretary, Lord Howe.
	If the ink is not yet dry on the document, how can the Conservatives already call for a referendum? They do not know whether the constitution will involve a substantial change. I believe that, so far, the document does not propose a substantial change in the way in which Britain is to be governed—certainly not as substantial as the changes in the Single European Act in 1987, or in the Maastricht treaty in 1992.
	The hon. Member for Stratford-on-Avon tried to tell us that we were going to have a president, and that we would therefore be entering a superstate. Perhaps he studied a little bit of French at school. The word "président" in French just means "chairman". It is very simple: there is not going to be a president of Europe. The hon. Gentleman is misleading the House.
	Let us deal with the pro-referendum—

Hon. Members: More! More!

Madam Deputy Speaker: Order.

Chris Bryant: They will be appearing in panto later in the season, Madam Deputy Speaker.
	Let us deal briefly with the pro-referendum arguments. The argument that has already been advanced by so many Conservatives is, "It's good enough for all the other countries of Europe, so why can't we have one here?" For a start, that is factually wrong. I shall correct the hon. Member for Stratford-on-Avon. Only three countries have so far committed themselves to holding a referendum. Five have said that they are thinking about it, two have said that they will definitely not hold one, and 15 have said that it is extremely unlikely that they will do so. The hon. Gentleman's argument does not hold water in terms of the facts, but it does not do so in terms of logic either.
	The logic of the hon. Gentleman's argument is that, since everyone else is doing it, we should do it too, but that would take us down the route of having qualified majority voting for treaty ratification processes. Why is he not arguing for a single European referendum? That is where his logic is taking him. I believe that it is much better for each country to follow its own tradition. Ireland's tradition means that it will have a referendum because it has to. Germany, following the tradition that we enforced on it in 1948 that it should not have plebiscites, will not hold a referendum because it is constitutionally impossible to do so.
	It is particularly interesting that the Tory leadership and Front Benchers are arguing for a referendum. They did not do so for Maastricht. On 21 April 1993, 85 Conservative Members who are still Members of this House voted against a referendum; only 13 voted in favour. The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) argued forcefully against a referendum, and he was practically manhandling people through the Lobby.
	The truth is that the Conservatives want a referendum for nakedly opportunistic reasons, so that they can say no—as the hon. Member for Stratford-on-Avon has already suggested that he would—and so as to start a complete unilateral renegotiation of all the treaties. But it takes two to tango, and it takes 25 to start a renegotiation of the treaties of Europe. The Tories have no one else to tango with or to renegotiate with. All that they are really talking about is withdrawal, and I urge the House to vote against this Bill.

Question put, pursuant to Standing Order No. 23 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
	The House divided: Ayes 145, Noes 233.

Question accordingly negatived.

Fire Services Bill (Programme) (No. 3)

Motion made, and Question proposed, pursuant to Orders [28 June 2001 and 29 October 2002],
	That the following provisions shall apply to the Fire Services Bill for the purpose of supplementing the Orders of 8th May 2003 and 3rd June 2003:
	Consideration of Lords Amendments
	1. Proceedings on Consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement at this day's sitting.
	Subsequent stages
	2. Any further Message from the Lords may be considered forthwith without any Question put.
	3. Proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—[Mr. Ainger.]
	Question agreed to. Orders of the Day

Fire Services Bill

Lords amendments considered.

Clause 1
	 — 
	Powers of the Secretary of State

Lords amendment: No. 1, in page 2, line 1, at end insert "or disposal".

Nick Raynsford: I beg to move, That this House agrees with the Lords in the said amendment.
	The amendment is intended to clarify the consultation arrangements for directions about property or facilities made under the power in clause 1(1)(b), which allows the Secretary of State to give directions to fire authorities about the
	"use or disposal of property or facilities".
	As originally drafted, the consultation requirements in clause 1(4) applied only to directions about the "use" of property or facilities. It is and was our intention that the same consultation requirements should apply to all directions under the clause 1(1)(b) power, whatever their content. The Secretary of State would therefore be required "as he thinks fit" to consult persons, or representatives of those persons, who
	"are, in his opinion, likely to be affected by the proposed direction".
	Concern has been expressed about the possible use of the power to require disposals of assets. In Committee, in response to some strongly expressed concerns, my hon. Friend the Member for Shipley (Mr Leslie), then the Under-Secretary of State, said that the provisions were
	"not part of some . . . asset-stripping fire station closure plan".
	He went on to remind the House that, as the Bain review highlighted, there were
	"all sorts of ways . . . of making savings in the fire service that involve neither selling off nor reducing the facilities available for the protection"
	of the public,
	"nor creating redundancies".—[Official Report, 3 June 2003; Vol. 405, c. 89.]
	I want to repeat that we do not intend to use directions under clause 1(1)(b) for asset stripping, some sort of privatisation or a mass fire station closure programme. However, we want to ensure that the proper modernisation of the fire service can be implemented. I fully expect and hope that this can be done without the use of these powers, but that may not be possible. If it is not, we will consult fully, as the Bill requires. I would not want to leave anyone with the impression, however mistaken, that the Government thought that lesser or no consultation was needed for any orders dealing with disposals. Therefore, to ensure consistency between the two connected provisions, we accept that the words "or disposal" should be added to clause 1(4).

Philip Hammond: Nobody could disagree with the notion that there should be consultation in the case of a disposal, as well as a direction for use. However, I want to place on the record that this was a simple mistake—a word was left out of the Bill's original text, which is the sort of error that we would usually expect to be picked up during a proper Committee stage. That rather underlines the dangers of a rushed process—of taking a Bill through all its stages in one afternoon. It proved possible for it to go to the other place with an important word missing from the text, and for that fact to be overlooked, despite it being scrutinised in this House. I hope that the Minister will take that point on board and consider long and hard before trying to rush through legislation again. We owe a debt of gratitude not to Government Front Benchers, but to the noble Baroness Turner, who picked up this error from the Back Benches.

Edward Davey: I, too, accept the Minister's emollient statement that this is a minor amendment, but it will be important to ensure that any consultation required under the Bill is full in respect of all of the proposed changes. It is worth placing on the record that the amendment does not make the Bill any better; overall, it is ill thought through and unnecessary. Although the Minister may say that the current impasse or delay in the negotiations justifies the Bill, the fact that both sides are negotiating suggests that it and the amendment are not needed. It is worth pointing that out, given what is happening outside this place.
	Lords amendment agreed to.
	New clause
	Lords amendment: No. 2, after clause 1, to insert the following new clause—Interpretation of the June 2003 agreement—
	'For the avoidance of doubt, nothing in this Act affects the possibility of the parties agreeing on a reference to mediation, conciliation or arbitration on the interpretation of the June 2003 agreement between the Fire Brigades Union and the local authority fire service employers.'

John McDonnell: I beg to move amendment (a) to the Lords amendment, in line 6, at end, add
	'or enables an action in tort on the ground only that it contravenes a statutory duty imposed by an order made under this Act, which would affect the possibility of mediation, conciliation or arbitration.'

Madam Deputy Speaker: With this we may discuss amendment (b), in line 6, at end, add
	'or enables the local authority fire service employers to impede the possibility of a reference to mediation, conciliation or arbitration by pursuing an action in tort on the ground only of contravention of a statutory duty imposed by an order made under this Act.'

John McDonnell: I begin by preparing the background to the amendment. Lord Lea moved amendment No. 2 as an avoidance-of-doubt clause because he was anxious to clarify in the Bill that nothing stands in the way of mediation. In other correspondence, the Minister has made it clear that such clauses are seen by Governments as clearly helpful, if not regular. They are helpful in avoiding any future misconstruction of the Bill by including in it an explicit statement as to its intent. I agree with, and support, this type of clause in principle.
	The purpose of my amendment is to seek to extend the avoidance-of-doubt clause to clear up—helpfully, I hope—a further doubt that entered into the debate after the Bill left the Commons and went to the other place. It is a straightforward amendment that explicitly overcomes that doubt, and it reflects the Government's intentions as stated in correspondence with Members of the other House and also in the debate in that House.
	That doubt was expressed in the other place at various stages by the noble Lords Wedderburn and McCarthy and by Baroness Turner. Those of us who have had any dealings with industrial relations and the related law during the past 30 years appreciate that Lords Wedderburn and McCarthy and Baroness Turner expressed a view on this subject that is based on decades of experience, and it comes from those who are the most qualified to express such a view. In fact, many in this House learned their industrial relations law at the feet of Lord Wedderburn, as an expert practitioner.
	The doubt expressed by those Lords is set out in a briefing note prepared by Lord Wedderburn, Professor Emeritus of commercial law at the London School of Economics, which was published on 1 November. I tried to place this note in the House of Commons Library, but I was informed that only Ministers or Mr. Speaker may do so. However, I have copies available in my office if Members wish to peruse the note.

Philip Hammond: The hon. Gentleman has set out the credentials of the noble Lords who first raised this issue as amendment No. 3 in the other place. As the Government refuted their case entirely, can he tell the House whether he believes that the Government are simply poorly advised by their legal advisers or are being duplicitous?

John McDonnell: I am trying to create a climate in this debate that is not confrontational. Doubt exists. The Government's advisers are not duplicitous or in any way incompetent; they simply have a view. The noble Lords, who have vast experience in these matters, have another view, and that leads to doubt. The situation is no more contestable or challengeable than that. This is not an "in your face" allegation.

Edward Davey: Is the hon. Gentleman saying that his amendment would simply clarify what Ministers say is already the position, and that it would therefore be helpful to include it in the Bill?

John McDonnell: That is exactly the purpose of the amendment, and nothing more. It is designed to take the Government's intention as stated in ministerial statements and enact it in the legislation.
	I shall explain the doubt that I described. On 30 June 2003, the Lords warned that the terms of the Bill contained a threat to the right of firefighters and the FBU to take lawful industrial action. This was not an intended threat by the Government—a point made explicit by the Secretary of State and the Minister—but it is a possible threat. The TUC has also expressed this concern. The Lords argued that the Bill contains provisions that could enable a claimant to obtain an injunction against a strike, or the threat of a strike, by the FBU, even in a trade dispute in which all legal requirements, such as a ballot, had been fulfilled. Why is that so? I shall answer that by referring to what I shall describe as the Wedderburn doctrine. In the UK, there is no explicit right to strike, but trade unions are now afforded certain immunities in law. Under part V of the Trade Union and Labour Relations (Consolidation) Act 1992, trade unions are protected in a trade dispute, and after a ballot, from actions on the basis of a breach of contract. That provision was inserted into law by Sir Charles Dilke, a well-known liberal progressive, in 1906.

Andrew Dismore: It was the Trade Disputes Act 1906, following the Taff Vale case.

John McDonnell: Indeed. The Taff Vale case was part of the instigation of the Labour party's foundation and representation in Parliament.
	The problem is that the Court of Appeal, in the case of Meade v. Haringey Borough Council, held that this protection does not apply where the union induces a breach of duty imposed by statute, not by contract. Lord Wedderburn quoted Lord Eveleigh at length in this regard. The union
	"may, in proper circumstances, induce others to break a contract in furtherance of a trade dispute, but they are not entitled with impunity to order or solicit a breach of statutory duty."
	Lord Denning agreed. He said that the legislation gives the unions
	"immunity if they induce a person to break a contract. But it gives them no immunity if they induce a local authority to break its statutory duty."
	The Government have contested that point, saying that there is an uncertainty in the meaning of Denning and Eveleigh, but those statements could not have been more explicit. Indeed, although the judgment in that case may have been criticised in the generality, there has been no criticism of the reference to the statutory duty. In addition, that interpretation was even used in the case of R v. The Governors of J School, in 2003.
	The new Bill introduces a number of statutory duties. Of the many examples that Lords Wedderburn and McCarthy raised in their briefing for the Lords debate, I shall cite just one that was seized on by Lord Wedderburn. Under clause 1(1)(b), the Secretary of State may
	"give . . . directions to fire authorities about the use or disposal of property or facilities."
	The fire authority has a statutory duty to comply with the direction contained in such an order. Wedderburn considers the example of a fire station closure and said that firefighters from the station under threat might persuade other firefighters to take industrial action against the closure and the removal of pumps, which threaten public safety and, indeed, jobs overall within the service. It could be after a ballot and it could involve all the members of the FBU nationally. The union, Wedderburn states, would "clearly be at risk" of liabilities
	"for inducing a breach of the fire authority's statutory duty to comply with the direction".
	Wedderburn further asserts:
	"At present it is lawful for firefighters to strike against the closure of stations. Under the new law as the Bill stands it would not be lawful."
	What was the Government's response to the noble Lords and Baroness Turner? Doubts were raised when the Bill was first debated on 30 June 2003 and the Government were warned about the problem. The noble Lords pleaded for delay and produced a detailed legal argument, suggesting helpful amendments. No legal argument came from the Government until four months later on 31 October. The response was contained in a letter from the Minister with a 10-page legal note three days before Third Reading.
	The first main point in the Government's response was that avoidance-of-doubt clauses are inserted only where doubt exists. I have to say that there is no doubt that there is a doubt on this matter. There is a contested doubt in the Lords from people who have a vast range of experience in industrial relations—they are challenging the Government's legal opinion. When noble Lords with great experience, as well as the TUC, express a doubt, there is a doubt.
	The Government also believe that it is "highly unlikely" that a union would not be protected by existing legislation, but highly unlikely is not certainty. The position enables an element of doubt to creep into any future actions. The Minister also stated clearly that the threat to firefighters' right to take industrial action was not present; that was not the Government's intention. I accept at face value the Government's assertion. I believe in the good will behind that statement, but the courts will not necessarily give effect to the intentions expressed by Ministers if those intentions are not enacted clearly in the Bill.
	In their note to the noble Lords, the Government relied on the case of Pepper v. Hart 1993, which has enabled ministerial statements to be considered, in limited circumstances, by the court as the background to legislation. However, ministerial statements do not govern the meaning of an Act. Pepper v. Hart enables construction of ambiguous, obscure or absurd statutory provision. In practice, it serves simply to remove ambiguity. Well, that is exactly what my amendment is designed to do—to remove the ambiguity at first stage.
	Lord Wedderburn drew Ministers' attention to the more recent case of Wilson v. First County Trust 2003, where the Law Lords again expressed a view on the general application of Ministers' interpretations. The result of that case was explicit: it is the words of the Bill, not the intentions of Ministers, that control the meaning of the Bill itself.

Kelvin Hopkins: My hon. Friend has talked about assurances from a Minister, which would at least morally bind an existing Government, but they would not necessarily bind a future Government who might be more hostile to trade unionism and take a different view of the legislation than the present Government. Is that not the case?

John McDonnell: There are clearly elements of future interpretation of legislation and future ministerial statements that might have some impact, but that is yet to be tested in the courts. It is open to debate, leaving further room for doubt. I shall be quick now, because other. Members want to contribute to the debate.
	We have all experienced the danger of doubt in industrial relations in negotiations about individual words, but it is more dangerous in industrial relations when injunctions are flying around. Injunctions against trade unionists taking industrial action are granted in interim proceedings. Most of us who have been involved in trade unions in the past will have had injunctions made against us at the interim stage. It is not only when a claimant, an employer or a third party can prove their case that an interim injunction is awarded, but when a claimant can show an arguable case.
	Diplock expressed a test—whether there was a serious question to be tried—which amounts to a different burden of proof for an interim injunction than for a full trial. If there is any doubt that the law is working against the individual union, it will be an arguable case. The arguable case obviously needs to be accompanied by a balance of convenience, and the Government have argued that that balance in many of these issues will rest with the union—but Lord Wedderburn said that he could find not a single case in which the balance of convenience has weighed in favour of a trade union in an interim injunction of this sort.
	I shall now return to the real world—with apologies to Lords Wedderburn and McCarthy and Baroness Turner in respect of the legal arguments. The Bill was introduced after a long and, I have to say, bitter dispute. The Deputy Prime Minister, the Minister for Local Government, Regional Governance and Fire and the Fire Brigades Union all want to put that dispute behind them and move forward to a programme of reform and investment in the fire service. However, the climate of industrial relations in the fire service is already deteriorating over the non-payment of the first stage of the pay award. The Government need to send out the clearest possible message from this debate that the Bill does not contain any hidden threat to the FBU's right to strike. The best way to achieve that is, with the greatest respect to Members present, to remove any doubt from the Bill—not by making a ministerial statement, but by building a provision clearly into the Bill to the effect that no action could be taken on the basis of a breach of statutory duty.

Joan Walley: I shall be brief because I know that several hon. Members want to speak. I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on the selection of his amendment and I am grateful that the Speaker has given us the opportunity to consider the amendments today, before the Bill becomes law. I cannot stress enough the urgency with which the Minister should respond to this brief debate.
	I was present at the Remembrance day parade in my constituency in Burslem on Sunday when I spoke to members of the Staffordshire fire service, and I am aware of a heartfelt demand and need to move on and leave what has happened behind, to embrace the modernisation agenda and to ensure that we have proper industrial relations in place. That is why I feel that clarification of the issues raised by Lord Wedderburn and others in the other place is critical.
	I believe that little more than poor advice is contributing to the doubts currently expressed and that the concern felt by many hon. Members should not inadvertently deprive the Fire Brigades Union of its protection in law in the event of it taking industrial action. The bare bones of the matter is that the statutory trade union immunity applies where the union has induced a breach of contracts, but the immunity does not apply, as my hon. Friend the Member for Hayes and Harlington set out, where the union has induced a breach of a statutory duty. If orders made under the Bill create statutory duties, it follows that industrial action taken against an order will, arguably—I say arguably—not be protected by the normal immunities. That is why I ask the Minister to respond to the concerns expressed today.
	The Government have made it clear that they do not intend to deprive the FBU of the right to protection for properly conducted industrial action. I do not doubt that for one moment, but that is why it is so important that adequate provisions to ensure that protection should be included in the Bill. That is the purpose of the amendment. If there is the slightest doubt that the Bill could lead to the removal of that protection—as my hon. Friend the Member for Hayes and Harlington said, it has been in place to help trade unionists for more than one century, I—and, I believe, many others—would expect the Government to take steps now to clarify the position.
	Anyone who has taken the trouble, as I have, to read the contributions of Lord Wedderburn and Lord McCarthy in the other place and to study the 10 pages of notes placed in the Library, and who knows of the integrity of our noble Friends and of all their work in employment relations, will conclude that a considerable element of doubt remains, although I saw that my right hon. Friend the Minister was shaking his head just now. The amendment will remove that doubt and it is difficult to see what possible objection the Government could have to that.
	In a celebrated court case relating to education, it was stated that the court can use Hansard only as an indication of the Government's intentions if the Act in question is ambiguous. If the Fire Services Bill receives Royal Assent and becomes an Act, following our deliberations today, it is in any way ambiguous, it is essential that I can take a message to those Staffordshire fire service members that we have been given a clarification by the Minister today. That would be helpful in the event of any action that the courts may take in future.

Edward Davey: On this occasion, I agree wholeheartedly with the hon. Member for Hayes and Harlington (John McDonnell). As he knows, my colleagues and I disagreed with his position on the actual dispute between the Fire Brigades Union and the employers and the Government, but he and we agree that the Bill is otiose and indeed odious. We agree that his amendment should be included so that we do not retain the doubts that he and the hon. Member for Stoke-on-Trent, North (Ms Walley) expressed.
	I agree with the hon. Lady. As she made clear, the amendment would confirm rights that have been around for many years. It is about 97 years since those rights were enshrined, during the first year of that great Liberal Government of 1906, and it is important that they be retained. It would be bizarre if a Labour Government were unwilling to be clear about that right when previous Conservative Governments, of a right-wing nature, have upheld it. It is odd that a Labour Government would want to allow any ambiguity, so I hope that the Minister for Local Government, Regional Governance and Fire will think again.
	The Minister wanted the power to impose a settlement through the Bill. We disagree, because we believe that mediation and arbitration—compulsory, if necessary—are a much better way forward. Ministers have always said, especially to Labour Back Benchers, that the measure would not make a strike illegal; it would not outlaw industrial action that followed a legally constituted ballot. However, given the evidence that we have heard—the remarks made by noble Lords who are extremely experienced in this area of the law—there is doubt. The Minister keeps shaking his head, but the fact that such opinions have been expressed suggests that there is a prima facie case to answer.
	The Government accepted Lords amendment No. 2 to ensure that there was no doubt about the status, in relation to the Bill, of the agreement made in June 2003. It would thus seem logical that the Government should allow the amendment proposed by the hon. Member for Hayes and Harlington to be tacked on to the new clause so that there is no doubt that properly constituted ballots for strike action would not be made illegal by the backdoor.
	Even at this late stage, I hope that the Minister will think again; he will not only placate Liberal Democrats but Labour Members.

Andrew Dismore: I declare an interest in that I remain a solicitor in a law firm that practises in industrial law, although I am not taking cases at present. I also spent a year working on it when, some years ago, I was a postgraduate student of Professor Lord Wedderburn, QC. Having completed that postgraduate degree, I practised in that area of law for 20 years, advising the Fire Brigades Union for most of that time—[Interruption.] I realise that I shall not be paid by the hour this afternoon.
	The FBU is law-abiding; it always has been and always will be—at least as far as I am aware. However, chief fire officers are incredibly litigious. During my time as an adviser to the FBU, I had to defend the union on many occasions in legal actions over trade disputes brought by chief fire officers. They seemed to think that was the way to sort things out, even though it usually made things 10 times worse in the fire service—as generally happens when people go to law over any form of industrial action.
	There is little doubt in this case. I know, from advising the FBU and many other public service unions over the years, that the whole tort of inducing breach of statutory duty is incredibly problematical for them. Statutory law has never really got to grips with providing the correct immunity for the right to strike of public sector workers.
	The real issue relates to the consequences if we are wrong in advocating our position. If we and the Government are completely wrong about the right to strike, the consequence will be that the right to strike is taken away from the fire service, not only in the context of the Bill but of the Fire Services Act 1947 and whatever may replace it. If we are only partly wrong, the inevitable consequence will be that a chief fire officer will try his luck if he is met with trade union opposition when asked to implement an order under the Bill.

Jeremy Corbyn: My hon. Friend the Member for Hayes and Harlington (John McDonnell) cited the judgment in Meade v. London Borough of Haringey. I was a member of Haringey council at the time. We closed schools for safety reasons and the subsequent case resulted in that judgment. Does my hon. Friend the Member for Hendon (Mr. Dismore) accept that the case was brought in an atmosphere of spite and vindictiveness against the council, which had closed schools to ensure that children were safe on that day? The case was brought for that reason alone rather than for any of the other reasons claimed by Meade and others.

Andrew Dismore: I am grateful to my hon. Friend for that intervention. He illustrates the fact that the point goes beyond the Bill. The tort of inducing breach of statutory duty is a major problem for the public sector in general and the Bill will make that worse for the fire service.
	Even supposing that we or the Government are only partly wrong, it means inevitably that a chief fire officer will test the position in the courts. Such a case would take place not against a background of civilised debate in this Chamber, but in the full spotlight of a major row in that industry. What view will a court take in those circumstances? Believe it or not, judges live in the world; they read newspapers and, in general, they come from a particular background. As my hon. Friend the Member for Hayes and Harlington said, the judge has only to be satisfied that there is an arguable case on the facts in law. That is an extremely weak test, which was introduced by Cyanamid v. Ethicon—if I remember correctly from my law student days.
	If a union failed to comply with an interim injunction, it would end up in the great chain of legal consequences that we saw during the miners' strike. Fines for contempt of court would be imposed and ultimately there would be sequestration, with all that comes from that. A law-abiding union could be put in an incredibly difficult position simply because the Government did not decide to accept an amendment that would avoid the doubt that the Bill could create. The consequences for the fire service, both generally and in terms of industrial relations, are serious. The consequences for public sector trade unions are serious, yet the problem could be dealt with relatively easily if the Government recognised that a small amendment to the Bill would make the position clear. It would not be a big deal for the Government to accept the argument put forward by the pre-eminent figure in this area of law since the war. Professor Lord Wedderburn is the leading expert in the field.
	Accepting the amendments would not even be a U-turn for the Government. If they do not accept them, the consequences for the fire service and public sector trade unions in general would be very severe.

David Hamilton: Will my hon. Friend put the matter in the simplest terms, for those of us who are not solicitors? Should not the rights afforded to FBU members be the same for every trade union member? Is not that the bottom line, irrespective of legal arguments?

Andrew Dismore: I know that the debate has been legalistic, but the question is: would the union be allowed to take industrial action if it objected to a direction given to the fire service by the Government? Such a direction might involve closing a fire station or redeploying a pump. There is grave doubt that the union could take industrial action legally.

David Drew: This is the crux of the debate with the Government. Shutting down a fire station would be the most controversial possibility, but a dispute could be with the Retained Firefighters Union rather than with the FBU. The retained firefighters would be put in an invidious position. What is my hon. Friend's opinion: should they represent their community, or obey the demands of the chief fire officer?

Andrew Dismore: If the retained firefighters were defending a station against closure for community reasons, the action would be illegal, as it would not be considered to be a trade dispute under existing law. If their aim was to defend their jobs, that would be a trade dispute, and therefore perfectly legal under existing law as well. However, it may not be legal under the Bill.
	Does the House believe that public sector workers should have the right to strike? That is the question. Such a major step is never taken lightly. There is no need to go into the reasons for the recent, terribly damaging dispute in the fire service, the first major dispute of its kind since the winter of 1977–78. I hope that the Bill does not cause a relatively minor problem that could be sorted out to escalate into something major and become the cause of confrontation.
	It is an essential human right that people are able to take industrial action. If we believe in that right, the amendment would avoid an awful lot of doubt. I urge the Government to accept it.

Philip Hammond: Before I deal with the amendments moved by the hon. Member for Hayes and Harlington (John McDonnell), I shall say a few words about Lords amendment No. 2. It is an avoidance-of-doubt provision, and it is bizarre to see it inserted in a Bill such as this. I can see whence the hon. Gentleman drew his inspiration.
	When the Minister responds to the debate, there are some matters that I hope that he will clarify. Although amendment No. 2 makes it clear that mediation, conciliation and arbitration over the implementation processes for the June 2003 agreement are possible, it does not preclude the possibility that the Secretary of State may use his powers under the Bill to negate the outcome. That renders amendment No. 2 superfluous. If it was inserted to send an emollient message, I hope that the Minister will make it clear that it is a matter of tone rather than substance.
	I am not a lawyer, but I am astonished that the Bill refers to a specific trade union by name. That raises the question of hybridity. I always thought that hybridity was created when a particular individual interest was dealt with discriminatorily by a Bill. I should be grateful for an explanation from the Minister of why that is not the case with this Bill.
	The Bill is time limited, unusual and untidy, but that does not compel the Opposition to vote against it. The use by the hon. Member for Hayes and Harlington of amendments to amendment No. 2 is slightly artificial as a way of reopening the debate on amendment No. 3 in the Grand Committee stage in the House of Lords, but it is interesting. Opposition Members in the Commons attacked the Bill for being toothless, as it contains no sanctions against the union. The hon. Gentleman, and his colleagues in the other place, have raised the suspicion that the Bill may contain some hidden teeth, and that although it provides no power to impose a strike ban, it presents the possibility that a trade union that takes industrial action could be exposed to actions in tort.
	The hon. Member for Hayes and Harlington noted that there were complex debates in the other place about the history of the law in this area. There was a clear ministerial statement that the Government's advice was that the Bill does not undermine the immunity of a trade union to take action in the circumstances outlined. The Opposition believe that the Bill needs to be more balanced in its treatment of employers and unions. I am prepared to accept the presumably well qualified advice that the Government have received, but it would not seem helpful to undermine the Bill's lack of teeth by inserting the sort of amendment proposed by the hon. Gentleman.
	To use a slightly unfortunate phrase, the firefighters' dispute has flared up again recently. Anything that reduces the FBU's appetite for conflict is helpful, and likely to benefit public safety. I understand the suspicion felt by the hon. Member for Hayes and Harlington, because if the amendments are redundant, the entire Bill is redundant too, because it contains no way of imposing the Secretary of State's directions on the employees. It has no sanctions in the form of a strike ban or exposure to action in tort, as the Government have confirmed. It does not allow the Secretary of State to do anything that the employers cannot do. The employers can impose terms and conditions unilaterally, move equipment about or dispose of premises. By abolishing section 19 of the Fire Services Act 1947 and recentralising the procedure, the Bill also goes against the thrust of Government policy.
	As drafted, the Bill is aimed not at the unions and employees, but at the employers. Its aim is to prevent the possibility that a recalcitrant employer will collaborate with the unions to avoid carrying out the modernisation process that the Government envisage. It allows the Government to pull the strings from the wings, without stepping into the limelight, as they can threaten to use the powers granted by the Bill. The employers are the only bodies to be placed under a direct obligation by the Bill.
	The situation that we face now, however, in November 2003, is exactly the one that we feared. It is one that the Government should have foreseen. A settlement was reached early in the summer, and the employers negotiated the details with the unions. But now, the unions are suggesting—quite scurrilously—that the detailed terms of the employers' offer somehow breach the terms of the settlement made in June. One of the senior labour negotiators on the joint negotiating committee has described that charge as dishonourable.
	Far from the employers being recalcitrant, the union executive, under pressure from the hard-liners within the union, is seeking to renege on the commitments that it made in June, and by contrast the employers, the targets of the Bill, are standing firm, having made what I think the Minister would agree is a generous and conciliatory offer—to pay half the settlement now unconditionally, and the remainder once the conditions have been implemented.

Edward Davey: I agree with the hon. Gentleman about that. Will he also make it clear that the extra 3.5 per cent. in stage 2 of the payment will be backdated to 5 November, so no union member would lose a single penny—

Madam Deputy Speaker: Order. We are discussing the amendment rather than the terms of the offer.

Philip Hammond: That is right, Madam Deputy Speaker; none the less, it might be helpful to confirm that what the hon. Gentleman said is true.
	The question is whether the Government will now back the employers to stand firm so that the union executive, in turn, is minded to stand firm against the hard-liners in the union who are trying to undermine the settlement of the dispute.
	The Government have always painted the Bill as a fall-back and a last resort, so I was a little surprised to hear the Minister, in his opening remarks today, suggest that although he very much hoped that that would be the case, it might not now be possible not to use the powers. That somewhat alarmed me. Perhaps the Minister can tell us something about the contingency arrangements that the Government are putting in place—

Madam Deputy Speaker: Order. I really must ask the hon. Gentleman to address his remarks to the words of the amendment.

Philip Hammond: Thank you, Madam Deputy Speaker.
	I think that I have largely covered the issues in the amendment. We said during the Bill's previous Commons stages that we would support a Bill as a temporary measure, if it had teeth. The Bill as drafted has teeth in relation to the employers; the Opposition's concern is that it has no teeth in relation to the employees. The amendment would provide what the hon. Gentleman sees as at least a set of gums, if not teeth, in relation to the unions. However, in the context of the currently revived dispute, it would not be helpful to send the union any signal that would entrench the position that its executive now appears to be taking up. For the reasons that I have explained, therefore, if the hon. Gentleman presses his amendment to a Division we will not be able to support him in that endeavour.

Angela Watkinson: I shall speak briefly to Lords amendment No. 2, the new clause that is to be inserted after clause 1. I hope that you will not rule me out of order, Madam Deputy Speaker, if my comments are inappropriate, because I want to highlight the importance of the word "interpretation". From my recent discussions with firefighters, I know that the two sides are in negotiations, but there are concerns about the interpretation of what has been agreed and what remains to be agreed.
	As we know, there is a staged pay award, but it depends on compliance with—

Madam Deputy Speaker: Order. I am sorry, but I must remind the hon. Lady of what I have said from the Chair before: comment must be germane to the amendments under discussion rather than to the offer or anything to do with it.

Philip Hammond: On a point of order, Madam Deputy Speaker. Would I not be correct in thinking that Lords amendment No. 2 itself is part of the group, so comments dealing with "mediation, conciliation or arbitration" in connection with the implementation of the 2003 agreement would be in order?

Madam Deputy Speaker: What I am trying to establish is that the amendment has nothing whatever to do with the pay offer. The words in the amendment, and the interpretation of those, are about
	"the possibility of . . . mediation, conciliation or arbitration".

Angela Watkinson: I accept your guidance, Madam Deputy Speaker, but I shall have to adapt what I intended to say considerably, because I thought that the words
	"the interpretation of the June 2003 agreement"
	would enable me to refer to the content of that agreement. Are you ruling that that is not possible?

Madam Deputy Speaker: Yes, indeed. That is my ruling.

Angela Watkinson: In that case, Madam Deputy Speaker, I shall have to draw my remarks to an abrupt conclusion.

Nick Raynsford: There have been three contributions in the debate, from my hon. Friends the Members for Hayes and Harlington (John McDonnell), for Stoke-on-Trent, North (Ms Walley) and for Hendon (Mr. Dismore), about the issue raised by Lord Wedderburn in another place, which I will tackle in a moment. The other main contribution—I am sorry that the hon. Member for Upminster (Angela Watkinson) was not able to cover the ground that she wanted to cover—was made by the hon. Member for Runnymede and Weybridge (Mr. Hammond), who asked a number of questions about Lords amendment No. 2 and the Government's intentions in relation to the Bill.
	Without straying into areas into which I cannot and will not stray, I can tell the hon. Gentleman that the purpose of the Bill remains exactly as it was when we first introduced it. It is, as he says, a long-stop. We hope that we shall not have to use it, but as is clear from the recent discussions, there cannot be absolute certainty that the dispute will not flare up again. The Bill was intended to provide the Secretary of State with the ability to draw a line underneath what has been, as my hon. Friend the Member for Hayes and Harlington said, a long and bitter dispute, to enable the fire service to look forward.
	As for hybridity, the reference to the Fire Brigades Union in Lords amendment No. 2 is a part of a description defining which agreement of June 2003 is being referred to. It in no way changes the rights and obligations of the FBU or the employers, so the concerns of the hon. Member for Runnymede and Weybridge about hybridity do not arise.
	The amendments tabled by my hon. Friend the Member for Hayes and Harlington return to an issue discussed at great length more than once in another place—the impact of the Bill on the protection offered by the Trade Union and Labour Relations (Consolidation) Act 1992 to unions representing staff, in this case the staff of the fire and rescue service.
	I shall again put on record what has been said repeatedly, particularly in another place, but also by members of the Government: the Bill does not jeopardise or alter the firefighters' or their union's protection or immunity under that Act. It is not about altering the framework of trade union law; it is simply about ensuring that if we need them, we have the powers to prevent the dispute, which I am afraid is still current, from affecting public safety.
	The two amendments take different approaches to that issue. Amendment (a) would provide that nothing in the Bill could enable an action in tort—in layman's language, that is an action under which someone has the right to sue—solely because of the contravention of a statutory duty imposed by an order under the Bill. The last part of the amendment appears to limit its effect to orders that would affect the possibility of mediation, conciliation or arbitration.
	I understand why my hon. Friend the Member for Hayes and Harlington tabled that amendment, but it would greatly restrict the impact of the provision, and I cannot imagine an order that would have that effect. Certainly, it is no part of our thinking that we might make an order about pay, hours of work or the use of appliances that would, or could, affect the possibility of mediation in any way. Therefore if the amendment really is limited to such orders, it would have no practical effect.

Andrew Dismore: Will my right hon. Friend give way?

Nick Raynsford: Let me deal with amendment (b) first. Then I will give way to my hon. Friend.
	Similarly, amendment (b) would provide that nothing in the Bill should enable the employers to impede the possibility of mediation, conciliation or arbitration by pursuing an action against the union over the breach of a statutory duty imposed by an order under the Bill. We do not believe that anything in the Bill would have that effect anyway. It is not our intention that any order would prevent the employers from seeking mediation.
	I shall now deal with the underlying point of the amendments, which is whether the Bill creates a new situation in which action could be taken against the union relating to a breach of a statutory duty created by an order under the Bill. As my noble Friend Lord Rooker repeatedly emphasised in another place, we say that it does not do so. Therefore none of the amendments is necessary or helpful.

Andrew Dismore: My right hon. Friend gave a list of things that he thought would not happen under the Bill. Would that list include hours of work and shift patterns, for example, which could easily form part of a trade dispute, or the place of work, which could be important in terms of fire station closure?

Nick Raynsford: If my hon. Friend will bear with me, I shall deal with precisely that point, which would almost certainly fall under the powers in clause 1(1)(a) rather than those in clause 1(1)(b).
	Given the importance of the issue and the genuine concerns that have been raised, we have taken extensive legal advice, and we remain convinced that there is no need for the amendments. They all turn on the difference between a breach of a contractual duty and the breach of a statutory duty. Let us consider an example in which the Secretary of State uses the powers in clause 1(1)(b) to direct a fire authority to make equipment available to a neighbouring authority, and the union does not like the direction and calls for industrial action. The firefighters work for the fire authority and have a contract with it, so if they take industrial action, they will be breaking their contractual duty and not their statutory duty. However, as long as the procedural rules about balloting have been followed and the matter is a trade dispute, the union and firefighters will be protected from action by the Trade Union and Labour Relations (Consolidation) Act, just like any other workers. The Bill makes no change whatever to the position.
	What the union would be trying to achieve through the industrial action is however a breach of the fire authority's statutory duty under the direction, so it has been argued, following Meade v. Haringey Borough Council—my hon. Friend the Member for Hayes and Harlington made this point—that a member of the public might be able to obtain an injunction against the union. One cannot obtain an injunction against the firefighters; this would be an injunction against the union preventing it from calling a strike, as by doing so, it will be inducing a breach of statutory duty.
	As I said, one has to remember that the Bill does not create new statutory duties. [Interruption.] No, it does not do so. It simply gives powers to the Secretary of State to make directions. We have stated on several occasions the circumstances in which the Secretary of State may make such directions. In any event, the powers are time limited to two years.
	Might any directions, if made, create statutory duties? For a Meade-type claim to succeed, one would have to show that there is a statutory duty that is actionable for damages at private law. That is not the same as the authority having a public law duty to carry out the Secretary of State's directions. A public law duty would allow a person with sufficient interest to judicially review the fire authority in the administrative courts if it had failed to carry out those directions. That is an entirely different matter. However, to bring an action to obtain an injunction against a union, an individual would need to show that, if the fire authority did not carry out the directions, a member of the public could sue it for damages.
	We should remember that not even the fire authority's primary duty of firefighting under section 1 of the Fire Services Act 1947 gives rise to such a claim, so if a homeowner cannot make such a claim where there have been no directions under the Bill, it would seem odd that they should be able to do so if a direction is made under it.

Joan Walley: Will my right hon. Friend give way?

Nick Raynsford: I am afraid that I do not have time to do so; I must finish my speech in order to give my hon. Friend the Member for Hayes and Harlington the opportunity to respond, as we are discussing his amendment.
	We have considered the case very carefully and been extremely careful to discuss it with our lawyers. I have spoken at some length with Lord Wedderburn and sent him a very detailed exposition of the legal advice that underpins our position. We do not believe that there is any reason for amending the Bill. The Bill as it stands makes it clear that the measures cannot create a position in which the trade union's position would be undermined in relation to normal protection.
	I urge my hon. Friend to withdraw his amendment.

John McDonnell: The clarity that we need has not been achieved today. The issue that we wish to address is whether a trade union would become vulnerable if it went on strike as a result of a statutory duty that had been imposed by the legislation. The statutory duty is imposed not on the union, but on the fire authority itself. That is the point that my hon. Friend the Member for Hendon (Mr. Dismore) tried to make earlier. Whether or not the Government's lawyers are asserting that they are right is not the point. The point is whether others are expressing a doubt. When Lord Wedderburn, the most pre-eminent industrial lawyer in this country, is expressing a doubt, we must understand that that doubt may well be used in a court of law. On that basis, the Fire Brigades Union will become vulnerable if it undertakes industrial action to preserve its service and jobs.
	The point of the amendment is not to contradict the Government, but to take their stated good intentions and place them in the Bill. It is no more challengeable than that. The Government have rejected that position, and I fear that there is only one way of seeking to test the opinion of the House—to press the amendment to a vote.

Question put, That the amendment to the Lords amendment be made:—
	The House divided: Ayes 85, Noes 412.

Question accordingly negatived.
	It being more than one hour after the commencement of proceedings, Mr. Deputy Speaker, proceeded to put forthwith the Question necessary to conclude proceedings, pursuant to Order [this day].
	Lords amendment No. 2 agreed to.

Taxes

Ruth Kelly: I beg to move,
	That the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2) Regulations 2003 (S.I., 2003, No. 2816), dated 5th November 2003, a copy of which was laid before this House on 5th November, be approved.

Mr. Deputy Speaker: With this it will be convenient to discuss the following motion:
	That the draft Stamp Duty Land Tax (Amendment of Schedule 5 to the Finance Act 2003) Regulations 2003, which were laid before this House on 30th October, be approved.

Ruth Kelly: I welcome the hon. Member for Hertford and Stortford (Mr. Prisk) back to the Dispatch Box. I have always enjoyed debating against him, and I look forward to his continued contribution.
	We have taken a bold step in modernising the stamp duty regime. That essential task was long overdue, but it was one that Conservative Members fluffed when they had the opportunity to carry it out. It was one that the industry had often requested. Today, I can tell the House that the Treasury has laid the formal order to implement the new regime on 1 December. We are in the middle of a major customer education programme aimed at ensuring that solicitors, licensed conveyors and other practitioners are fully aware of the changes that are about to take place. The new arrangements will create a more robust tax regime for land and building transactions in the United Kingdom by addressing long-standing distortions and loopholes in the current charge that have been increasingly exploited by big commercial players at the expense of the majority of taxpayers.
	In last year's Budget, my right hon. Friend the Chancellor announced that, as a result of tax avoidance, only half the stamp duty owed on all large commercial property transactions—worth £10 billion a year—is paid and that the 2003 Finance Bill would introduce new anti-avoidance powers to close those loopholes. It did. We now have a modernised, streamlined stamp duty system, with effective enforcement powers in line with other taxes. My right hon. Friend also committed the Treasury to reviewing the lease duty regime to ensure that businesses pay stamp duty on a fair and consistent basis. I shall deal with those lease duty regulations first.

Jonathan Djanogly: The British Retail Consortium says that those changes will lead to three quarters of retailers limiting their expansion plans. Does the hon. Lady consider that fair?

Ruth Kelly: To be honest, I do not think that the British Retail Consortium has credible figures to argue its case and I will shortly come to the impact of the new lease duty regime on small businesses in particular.

George Osborne: Will the Financial Secretary clear up something right at the beginning? This is called the stamp duty land tax. In what sense is it a stamp duty—there is no stamp and no duty?

Ruth Kelly: I know that the hon. Gentleman, whom I much respect, has a long-standing interest in the name of the stamp duty land tax—he referred to it frequently in debates on the Finance Bill—but the name is commonly understood by practitioners, and it also clarifies for the first time that the new tax regime applies to land transactions rather than to any other sort of transaction.

Jonathan R Shaw: My hon. Friend will understand the concern of David Chesover, who is a general practitioner at the Thornhills medical group in my constituency. The group is due to move to new premises, and he has written to me saying that it expected to pay £4,000, but that the sum could now amount to about £36,000. What assurances can my hon. Friend give me that she has had discussions with the Department of Health to ensure that GPs are not put off moving to new premises and being involved in LIFT—the local improvement finance trust programme—which we both obviously support?

Ruth Kelly: My hon. Friend makes a powerful case on behalf of his constituent, and I commend him for that interest. I assure him that the Department of Health was consulted fully in developing these proposals. If he has specific concerns about the LIFT programme in his constituency, I would be very happy for officials in my Department to work with officials in the Department of Health to ensure that any concern that he has can be met.
	Let me describe how the stamp duty regime has changed. Under the current stamp duty regime, lease duty is charged at different rates according to the term of the lease. That structure is unfair, arbitrary and distorts business decisions. For example, a 35-year lease is charged at 4 per cent. of the upfront premium paid, plus 2 per cent. of average annual rent, whereas a 36-year lease is charged at 4 per cent. of the premium, plus 12 per cent. of the average annual rent. If transactions relate to freeholds, 4 per cent. is charged on the entire purchase price. Given such cliff edges and the lack of coherence between leases and freeholds, decisions on transactions are driven by tax considerations, rather than by commercial ones.

Mark Simmonds: Will the Financial Secretary give way?

Ruth Kelly: I must make some progress with the argument.
	Under a modernised regime, without widespread avoidance, such distortion would become increasingly clear. However, recognising the distinct nature of leases, my right hon. Friend the Chancellor announced that the Finance Bill would make provision for a charge of just 1 per cent. of the rental value of all new leases—four times lower than the usual stamp duty rate, on which we consulted in 2002. He also allowed further time for consultation with business and commerce on how to reduce avoidance and promote a more level playing field between leases and transfers. He added:
	"If I have to trigger the change, I will increase the exemption from stamp duty for commercial property from £60,000 to £150,000 . . . Therefore, in any event, there will be no duty on 60 per cent., of commercial rental contracts."—[Official Report, 9 April 2003; Vol. 403, c. 279.]

Several hon. Members: rose—

Ruth Kelly: I give way to the hon. Member for Hertford and Stortford, who speaks from the Front Bench.

Mark Prisk: Can the Financial Secretary confirm that the data on which that 60 per cent. promise is based erroneously include lock-up garages, advertising hoardings and car-parking spaces and not just businesses?

Ruth Kelly: I certainly will not confirm that because that is not the case. [Interruption.] The hon. Gentleman asks from a sedentary position whether I will publish those figures, but let me deal with that 60 per cent. figure for a moment. That figure, which was estimated at the time by the Inland Revenue, has since been independently verified by the Investment Property Databank, which is very well respected, using research funded by the property industry. In fact, the database is far larger than that used by the Inland Revenue. It is based on £100 billion of commercial property and includes 15,000 leases. The data were circulated to the consultative committee, and I am sure that, if the hon. Gentleman asked the IPD, it would probably be prepared to publish the data.

Mark Prisk: I have a copy of that survey, which the Financial Secretary has also obviously read. Can she confirm that it deals with only 5,000 hereditaments and that it had to be enhanced to become a representative sample by adding the erroneous data from the Land Registry that I criticised earlier?

Ruth Kelly: I do not think that that is the case. In fact, the figures are 5,000 leases a year and 15,000 leases in total. I think that the hon. Gentleman's argument is that 60 per cent. is too high a figure. I could make the opposite argument: it is probably too low a figure, because the data to which it had access were primarily on those properties that must be registered, which are primarily the higher-value properties. The sorts of properties that might be excluded from the survey are precisely the small shop fronts, shop leases and lock-up garages in which I know that he has a particular interest. If anything, the figure is biased downwards rather than being too high.

Mark Prisk: I am grateful to the Financial Secretary for allowing us to clarify the situation. She started by saying that the figure is 60 per cent., and now it is possibly 87 per cent., but it could be higher or lower. What is worrying business is that the promise made at the Dispatch Box in the Budget by the Chancellor is based on false data. I have asked the Chief Secretary once to publish it so that we can clear up the problem. He has refused. Will she do it so that we can make sure that we are basing this tax on proper information?

Ruth Kelly: As far as I understand it, the Chief Secretary in no way refused to publish that data. They were not his to publish. They belong to the IPD. I am absolutely sure that if he asks it to publish its data, it would do so. I would certainly support that information being putinto the public domain. If anything, more than 60 per cent. of all leaseholds will be exempt from this tax. The figure of 60 per cent., or a figure greater than that, compares with around 9 per cent. of commercial leases that are not chargeable to stamp duty under the current regime. Many leases taken out by small and medium-sized enterprises and business start-ups that currently require the payment of stamp duty will therefore not do so under the new system.

George Osborne: While the Financial Secretary is clarifying matters, will she answer the question from the hon. Member for Chatham and Aylesford (Jonathan Shaw), who is normally an enthusiastic—indeed, over-enthusiastic—supporter of the Government? He points out that in his constituency a medical business will see its land tax bill go from £4,000 to £36,000. Does she think that that is possible?

Ruth Kelly: It is certainly the case that the contract could be restructured so that it would not have to pay that amount of money—[Interruption.] I would certainly be prepared to look at the example that has been given, to see whether we can work with Department of Health officials to ensure that there is no impact on LIFT programmes.
	In addition, around 93 per cent. of residential leases will not be chargeable for duty under the new structure. The modernised structure was based on five key principles. It was designed to minimise the scope for avoidance, to adjust the distortions inherent in the current system, to better reflect modern commercial practice, to be based on clear economic principles, and to be more in line with the charge on freehold transfers. The regulations today put the final legislative provisions in place for implementation. During the extended consultation process, a number of alternative proposals were submitted to us. Many were based on average annual rent. Because of the potential for avoidance, and because average annual rent does not assess the full economic value of the tenant's interest, it could not be a suitable basis for a new structure. I believe that net present value represents a commercially and economically justifiable way of assessing the economic value of the tenant's interest.

Mark Prisk: The Financial Secretary is generous to allow me to intervene on this important issue. The Treasury is seeking to use a discount rate in this net present value valuation methodology, which is completely detached from the real market. Can she explain why?

Ruth Kelly: I am about to refer to the discount rate if the hon. Gentleman will allow me. Before I do so, I want to explain how the net present value represents the economic interest of the tenant. First, it recognises that shorter leases are economically of less value than longer leases, which in turn tend to resemble freeholds. Secondly, we have set the rate of tax on the net present value of the rental element of a lease at a significantly lower rate than that of freehold transfers.
	To turn to the discount rate, in which I know that the hon. Gentleman is interested, we have chosen a discount rate of 3.5 per cent., because that takes account of the fact that future increases in these payments will not be included in the NPV calculation, and that the level of lease payments will already have been set taking risks into account—it is the Government's assessment of a risk-free discount rate. I am sure that the property industry would recognise that.

Mark Prisk: I must dig into my land management class as a chartered surveyor, but the Financial Secretary seems to have just said that she will use contradictory valuation methods. On the one hand, the Treasury is seeking to provide what is known as an all-risks yield, yet in fact the valuation methodology is discounted cash flow. Why is there a contradiction?

Ruth Kelly: As I have already explained—this was also debated during the Finance Bill—this represents the risk-free level of the discount rate. Any other calculation would artificially benefit those who take out longer leases—generally larger businesses in their commercial property transactions—rather than the small business element.

Ian Liddell-Grainger: Will the Financial Secretary give way?

Ruth Kelly: I must make some progress. I have taken a lot of interventions, as I am sure the hon. Gentleman understands.
	Other proposals suggested raising the nil rate threshold, having a starting rate or both. We shall of course continue to keep rates and thresholds under review. However, the figures that I gave earlier on the percentage of commercial leases that would not be chargeable under the new structure suggest that the proposed thresholds would exempt a large number of leases, especially those entered into by small and medium-sized businesses and business start-ups.
	During the consultation process, many commentators expressed the view that the slab structure, under which the whole amount of net present value comes into charge when the threshold has been exceeded, created distortions. I accept that and, for that reason, propose to change the structure so that only the excess over the threshold would be taxable. That will mean that every time that a lease is chargeable, the duty will be £1,500 less than it would be under the original proposals. The relief will be of particular benefit to small and medium-sized businesses and business start-ups.

Mark Prisk: Now that the Minister is to have a slice approach on business leases, will the Government do the same for residential properties?

Ruth Kelly: We constantly keep the stamp duty system under review. The hon. Gentleman will appreciate that we have undertaken huge modernisation of the stamp duty regime, which Conservative Members avoided doing when they had the chance. I hope that he will give us credit for our action to date.
	The amendment to the Finance Act 2003 to achieve the change is set out in paragraph 1 of the schedule to the regulations. Paragraph 2 of the schedule makes a technical change. Under both the current system and the new regime, a premium on the grant of a lease is charged at a rate of nil if it does not exceed the threshold. However, the nil rate applies only if annual rent does not exceed £600, which prevents avoidance by recharacterising a premium as rent. Paragraph 2 will ensure that when assessing the annual rent, any linked transactions will be taken into account. That will prevent avoidance by splitting up a single transaction into smaller transactions. We do not believe that the change will have any effect on genuine commercial transactions.
	I turn to the Stamp Duty and Stamp Duty Land Tax (Variation Of The Finance Act 2003) (No. 2) Regulations 2003. The changes to the Finance Act 2003 are contained in the schedule to the regulations and I shall give a brief, non-technical description of each of them. [Interruption.] I am sure that Conservative Members are interested in what I am saying.
	Paragraph 1 relates to the charge to tax when a contract is substantially performed because the purchaser takes possession. It will ensure that that includes possession by someone connected with the purchaser, such as a company in the same group. It will also clarify a potential ambiguity in the definition of taking possession.
	Paragraph 2 will give partial relief for sale and lease-back transactions. It will exempt the lease-back leg of such a transaction from charge, subject to certain conditions. That reflects the fact that companies that sell and lease back their property commonly do so purely to raise finance rather than to acquire any new economic interest in the land.
	Paragraph 3 introduces schedule 6A, which will give relief for a number of acquisitions of residential property, which were the subject of debate earlier this year when my right hon. Friend the Chief Secretary to the Treasury gave a commitment that relief would be considered. The schedule will replace the current limited reliefs for part exchanges and relocations, provisions for which are in sections 58 and 59 of the Finance Act. We believe that the reliefs will help to smooth the process of house buying for many people.
	The transactions covered are: the acquisition of residential property, either by a house builder or a third party, when individuals buy a new house from a builder; certain acquisitions of residential property by chain-breaking companies—companies that specialise in stepping in when prospective sales fall through; the acquisition of residential property by either an employer or a third party in connection with the relocation of an employee; and acquisitions of residential property from personal representatives of people who have died by companies that specialise in that business. In each case, there are conditions to ensure that the relief is not abused and to permit withdrawal of the relief in cases of abuse.
	Paragraph 4 will give relief when a unit trust is set up by seeding it with property. That will happen if the company that sets up the trust transfers property into it in exchange for units in the trust.
	Paragraph 5 will make provision for a further return if additional tax becomes chargeable because of a later transaction. An example of that is the grant of an option followed by its exercise.
	Paragraph 6 will permit the holder of a power of attorney to sign a return on behalf of a purchaser—we received several representations on that matter. Paragraph 7 will ensure that transactions by the Crown will be subject to stamp duty land tax in the same way as they were to stamp duty. I should perhaps mention that existing exemptions from stamp duty for public bodies, such as Government Departments and health authorities, have been carried forward into stamp duty land tax.

Ian Liddell-Grainger: My constituency has an enormous amount of Crown land. Three generations are covered on one lease for such land, and after the death of a lessee, the land will automatically go to the next person—there will be a family transfer. Will such a procedure still be exempt?

Ruth Kelly: Whether it is exempt would depend on the terms of the original lease and how it was drawn up. I am willing to consider any example that the hon. Gentleman sends me and reply appropriately.

Adrian Flook: Taunton has the same problem as the constituency of my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger) because much of it is also Crown Estate land. Has the Crown Estate advised the Treasury on the impact that the measures will have on most of its leases?

Ruth Kelly: We have treated the Crown Estate in the same way as it was treated under the old stamp duty regime and it is content with the proposals.
	Paragraph 8 introduces schedule 17A, which relates to leases. As that is a distinct matter, I shall deal with the remaining paragraphs first. Paragraph 9 clarifies that the £5 fixed stamp duty is abolished for duplicates and counterparts of land transactions within the scope of the stamp duty land tax. Paragraphs 10 and 11 make minor changes to the transitional provisions in response to representations.
	On schedule 17A, hon. Members will know that we had extensive consultation on the treatment of leases, much of which related to the charging structure, the subject of the other set of regulations. We also received many comments on technical aspects. The provisions address those concerns, although some are also intended to counter avoidance. The first issue is the treatment of leases if either the length cannot be ascertained at the start of the term of the lease or the lease continues beyond its stated end date. That often happens with both business and residential tenancies for a number of reasons, including statutory provisions giving security of tenure and, in Scotland, the doctrine known as tacit relocation. We consider it right that tax should be charged by reference to what turns out to be the actual length of the lease. Not to do so would permit avoidance by the grant of a very short lease when all parties know that the tenant will stay in occupation and pay rent for a much longer time.
	Paragraphs 3 and 4 of schedule 17A therefore provide that for tax purposes a lease can grow beyond its stated term, one year at a time, and that additional tax may be payable as a result. The additional tax becomes due as the lease grows and interest on the additional tax is not backdated to the start of the lease. That is unlikely to be of concern to most residential tenants, for whom periodic tenancies are most common, since 93 per cent. of residential leases are not chargeable to tax. Paragraph 5 applies the same treatment if a number of successive leases are granted as part of a single arrangement. Paragraphs 6, 10, 13, 16 and 18 reproduce existing provisions in the Finance Act 2003 for convenience, so that all material on leases is brought together.
	Paragraphs 7 and 8 deal with leases with uncertain rent, such as those under which rent varies with turnover; the intention is to give certainty and reduce the compliance burden on tenants. They provide for an initial return by the tenant on the basis of his or her best estimate of the rent that is to be payable while ignoring any changes that might take place more than five years after the start of that lease. After five years, or at any earlier time when uncertainties are resolved, the tenant makes a further return in the light of what he or she now knows the rent to have been, again ignoring any changes that might take place more than five years after the start of the lease. Any additional tax due is then payable or tax overpaid is repaid. Those provisions replace the provisions on rent reviews in the Finance Act 2003.

Mark Simmonds: If a lease is purely a turnover lease and there is no base rent for the first five years of that term, does that mean that no stamp duty will be paid because it comes under the £150,000 threshold?

Ruth Kelly: It will depend on whether the best estimate comes under the £150,000 threshold. As I outlined, an estimate has to be made of what rent is payable. I am sure the hon. Gentleman will reach the same conclusion when he studies the provisions.
	Paragraph 9 gives relief when a lease is surrendered and replaced by a new lease. That often happens when landlords and tenants want certainty for the future or when renegotiations take place. The paragraph provides that rent that has already been taken into account in calculating the net present value of the surrendered lease is not taken into account again in calculating the net present value of the new lease.
	Paragraph 11 is designed to counter avoidance. Without it, a lease could be granted in circumstances where no tax is payable, such as within a group, and then assigned for a nominal amount to a third party. The assignment would normally be chargeable only on the consideration given. The paragraph ensures that in those circumstances tax is chargeable as if there were the grant of a new lease.
	Paragraph 12 deals with situations where a lease is assigned and there is an obligation to make a further return. It specifies that the assignee is responsible for that obligation. That is necessary because often assignors are impossible to trace, or are companies in liquidation.
	Paragraph 14 is designed to counter avoidance. As I said earlier, events taking place more than five years after the start of a lease are usually ignored. However, that would permit a large increase in rent five years and one day after the start of a lease to escape tax. The paragraph therefore provides that where a rent increase exceeds a certain amount, determined by a formula related to the retail price index, tax is charged as if that were the grant of a new lease.
	I am grateful to the eagle-eyed people who spotted that the formula in the earlier version of the regulations contained a slight but vital error—I put my hand up to that. Hon. Members will appreciate that there is no facility for amending a statutory instrument, so the regulations had to be remade. That is why we are debating the second version instead of the original.

Mark Prisk: I am grateful to the Financial Secretary, who informed me of the error last week. In relation to paragraph 15, will she clarify which of the three formulae in the six-step process that tenants use to work out what they have to include as an abnormal rent was incorrect?

Ruth Kelly: One number was missing from one of the formulae. I am afraid that I cannot remember the order in which the formulae are presented in the regulations, but I shall respond later to that specific question.
	Paragraph 17 makes it clear that on an assignment of a lease, and except where paragraph 11 applies, the assumption by the assignee of the obligation to pay rent and observe and perform the other covenants in the lease does not count as a chargeable consideration. In other words, the assignee is charged only on what he pays to acquire the lease.
	In conclusion, we have consulted business, and we have listened. We are taking further action to protect small businesses and enterprise while reducing distortions and securing a fair amount of revenue from those transactions. The regulations before us will remove 60 per cent. of all commercial transactions from the charge completely, and businesses that pay more under the proposals will pay at a flat rate of 1 per cent.—considerably less than the 4 per cent. on an equivalent purchase. The regulations remove the vast majority of residential leases from the charge.

David Laws: Will the Financial Secretary clarify the net effect of the Government's proposals on the Exchequer's aggregate revenue for the next two years?

Ruth Kelly: The reliefs that we are granting today will reduce the aggregate revenue that has been published in the Red Book by £20 million, which will bring first-year revenue down to £170 million from the lease duty proposals.
	We have listened to business on sale and lease-back transactions, chainbreaking companies and employee relocation, and have introduced measures requested by the industry to reduce the compliance burden. I therefore commend the regulations to the House.

Mark Prisk: May I reciprocate the Minister's remarks? I must confess that it is rather worrying to be welcomed back when I was not aware that I had been away in the first place, but she made a generous comment. In turn, may I say that all of us who served on the Committee that considered the Finance Act 2003 are pleased that she is back? It is true that we had some fun with the Chief Secretary to the Treasury in Committee, but hopefully we will get some serious answers now.
	We are considering two sets of regulations. The first set seeks to amend schedule 5 to the Finance Act by revising the tax structure as it applies to business leases. The second tries to answer some of the many questions that the Government failed to address in the Act itself. I shall preface my remarks by telling the Financial Secretary that the piecemeal introduction of the new tax is wrong in principle and mistaken in practice. The Government are using section 109 of the Act to push large parts of the tax through Parliament without due consideration, and I hope that in her reply she will assure us that the Government do not intend to use that as a precedent for other tax changes.
	In considering these two regulatory instruments, I suspect that the House will wish to recall the original aims of this new tax as set out by the Minister, who was then Economic Secretary, in April 2002. In the document, "Modernising Stamp Duty", she told us:
	"Our aim is to create a stamp duty that better reflects modern commercial practice".
	Above all, we were told that fairness would be at its heart. Sadly, those laudable aims have gradually been replaced by the one overwhelming and desperate need of this Government—to collect the maximum amount of tax revenue to fill the black hole in their finances. As Bill Moyes, director general of the British Retail Consortium, put it only today:
	"The Treasury claim—that they are tackling avoidance—is a red herring. This latest tax is a bid to refill the Treasury coffers, by milking the only sector that has refused to be beaten by the burgeoning weight of tax and regulation."
	How right he is.
	I shall consider the regulations concerning schedule 5 later, but I come first—hoping to be somewhat more technical than was the Financial Secretary—to the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2) Regulations 2003. Unfortunately, as the Financial Secretary said, it is the second set of regulations issued by the Treasury. I am grateful to her for drawing our attention to that problem. As a result, outside organisations have had fewer than five working days in which to consider the correct regulations. Sadly, that is part of a pattern as regards this tax—from conception to consultation to legislation, the whole process has been rushed through with little time for business or Parliament to get it right.

Mark Simmonds: As always, my hon. Friend makes a forensic case. Is he aware that with only 13 working days to go until 1 December, when the duty is supposed to be fully operational, neither set of regulations contains details about sub-sales and securitisation?

Mark Prisk: My hon. Friend hits on a point that is of real concern to businesses.

Jonathan Djanogly: Is my hon. Friend further aware that the Government say that they have to restart the consultation process on partnerships from scratch? How will they do that in 13 days?

Mark Prisk: The root of the problem is that the tax is being made up on the hoof. On Third Reading, the Chief Secretary told us that it would take a couple of years to refine it. That is no way to make tax law. Many outside bodies and experts in the field concur with that conclusion. Today, we have a maximum of three hours in which to consider 26 pages of detailed changes—the result of this mad rush will be bad law.
	I understand that even as of yesterday, the tax return forms that taxpayers will have to complete are yet to be issued, with only 12 working days to go. Can the Financial Secretary tell the House whether those forms have been published or distributed? She is nodding, so we will take that as a yes.
	The regulations contain several specific issues that give considerable cause for concern. I turn first to the question of sale and lease-back arrangements. We welcome, in general, the reinstatement of relief for that common form of transaction. When I first drew attention to that oversight in Committee, the Chief Secretary seemed remarkably unaware of its significance. I am glad that the Financial Secretary saw sense and responded, but I have questions relating to the qualifying conditions in the regulations. Subsection (3)(a) of new section 57A states that the property must not be residential. How will mixed-use properties be treated? For example, how would an old mill be treated if the lease-back arrangements envisaged a part residential accommodation? Similarly, can the Financial Secretary define the phrase "same premises" under subsection (3)(c)? Does that mean the same hereditament or something else? Subsection (4) refers to market value. Does that mean open market value? If so, what valuation method is envisaged?
	The Financial Secretary referred to exchanges. The amendments, which relate to residential property exchanges, follow discussions in Committee. At one point, the Government's plans bizarrely denied relief to elderly people who sought to trade down in their retirement yet exempted those who wanted to trade up to, for example, a mansion. That was a peculiarity and, to be fair to the Government, they relented after we questioned the Financial Secretary about it.
	Will the Financial Secretary confirm that the meaning of "new dwelling" in schedule 6A covers the conversion of properties, including a change of use? That is unclear in the drafting. For example, would a former workhouse that was converted into flats be acceptable? That is a change of use and a conversion. The financial viability of many urban regeneration schemes will be directly affected by her answer.
	Why does paragraph 8 of the same schedule specifically exclude sole traders and the self-employed from the definition of property trader? What is the ground for discriminating against unincorporated enterprises? Was it simply an oversight?
	Why do the Government feel the need to set a maximum figure for expenditure on refurbishment schemes under paragraph 9? How will that be enforced without creating a new raft of bureaucracy? Are people to provide receipts or invoices? Who will check the evidence of work done and its value and ensure that the figure of £20,000 has not been exceeded?

Ian Liddell-Grainger: My hon. Friend makes serious and interesting points. What about the position when the purpose of a grade 2 listed building has been changed and a subsequent refurbishment is undertaken, in which the façade is VAT exempt because the building is listed? I can find nothing about listed buildings in the provisions.

Mark Prisk: Perhaps listing is separate from the immediate regulations that we are considering, but my hon. Friend makes a good point. He draws attention to the question of whether the Government have thought through the unintended consequences.
	I want to ask the Financial Secretary about value as well as practicalities. It is fair to say that many people might consider the figure of £20,000 per unit for refurbishment a reasonable cap. However, the sum could prove wholly inadequate when, for example, asbestos needs to be removed. The result could be that the most dilapidated buildings remain empty. What assessment has the Treasury made of the effect on urban regeneration projects? How will the Government ensure that the worst buildings do not continue to stand empty?
	The Financial Secretary referred to paragraphs 2 and 3 of schedule 17A. Paragraph 3 deals with the extension of fixed-term leases. She claimed that the change was fair, but is it fair for tenants to face an additional tax bill because of an event beyond their control? If a building is expected to be demolished for a planned new road, a fixed-term lease might be granted. If a long delay occurs or demolition is cancelled, is it fair to tax again? Do the Government intend to tax people in those circumstances?
	I have received several professional and business representations, including from the Institute of Indirect Taxation, on leases for indefinite terms. There is considerable anxiety about the bureaucracy that the regulation will create. When a tenant exercises his or her statutory right to renew, how will the new lease be treated? Will it be linked with the original lease or not? There is a significant tax difference.
	The treatment of variable and turnover rents is important and my hon. Friends have referred to that. The Financial Secretary partly responded. As members of the Committee that considered the Finance Act know, the legislation failed to account for variable rents. They typically occur in the retail sector, but they also exist in the licensed and hospitality sectors. As the original legislation stands, the occupier would have to submit a new tax return every time the rent varied. That would create an unbearable compliance burden. I welcome the Government's acknowledgement of our anxieties, but I remain to be convinced that the offered solution makes business sense.
	Paragraph 7 on page 13 of the regulation allows for just one return after the fifth year. Up to that point, each new rent level means a new tax return, but under these proposals, just one return would be required after the fifth year. A lot of people in business—particularly in small businesses—argue that that is illogical. After all, it is the first few years that make a difference when setting up a business, so why leave business start-ups with the greatest compliance burden?
	Paragraph 14 on page 16 of the regulation deals with the treatment of so-called abnormal rents. The Financial Secretary told us that that this was an anti-tax-avoidance measure. I hope that she will not be giving any advice on that aspect of it today. As drafted, this paragraph and paragraph 15 are misguided in purpose and hideously bureaucratic in form. Indeed, all the independent experts believe that they run counter to modern commercial practice. I say that because the regulation provides that where there is an increase in rent after the fifth year, the tenant must assess whether that increase is abnormal.
	I am sure that hon. Members are beginning to wonder what "abnormal" means, and the answer lies in paragraph 15 of the regulation, which sets out a two-page, three-formula, six-step definition. Believe it or not, this is what tenants are going to have to understand in order to work this out. In step 1, they will need to define the start date, which is
	"the beginning of the period by reference to which the rent assumed to be payable after the fifth year of the term of the lease is determined in accordance with paragraph 7(3)".
	So that is a nice easy start.
	Then we move on to step 2, in which the tenant will need to divide
	"the period between the start date and the date on which the new rent first becomes payable"
	and they are given two ways in which to deal with that. I trust that hon. Members are keeping up with this so far. Step 3 moves us on to finding
	"the factor by which the retail prices index has increased over each period identified in step two",
	so I hope that we are all aware of what happened in step 2. We are then told:
	"This is a figure expressed as a decimal and determined by the formula—
	(RD-RI)/RI
	where—
	RD is the retail prices index for the month in which the last day of the period in question falls, and
	RI is the retail prices index for the month in which the first day of the period in question falls."
	I should warn Members that it gets quite complicated after this.
	In step 4, tenants are asked to find
	"the relevant factor for each period identified in step two."
	If I may help the Financial Secretary, I suspect that this might have been the point at which there was a figure missing, resulting in the Treasury having to pulp all the original regulations. Step 4 goes on:
	"This is a figure expressed as a decimal and determined by the formula—
	1+B0.05 x m/12N+r
	where—
	m is the number of months in the period in question . . . and
	r is the increase in the retail price index over the period in question, determined under step three."
	Obviously. What could be simpler? I do not know how the Treasury could have got that wrong, but there we are.
	Tenants have reached step 4, and they are obviously doing very well, so they are now asked to move on to step 5. Here, they are asked to find
	"the uplift factor for the reference period",
	and there is just a seven-paragraph section to explain what that is. I will not detain the House with that at this point.
	Finally—I suspect that hon. Members will enjoy that word—we come to step 6. Here, the tenant—should they still be awake—must assess, using the third of the formulae, that the
	"rent increase will be regarded as abnormal if the new rent is greater than
	R x UF
	where—
	R is the rent previously taxed . . . and
	UF is the uplift factor for the reference period."
	So there we have it. It could not be simpler.
	I have to say that this is Sir Humphrey Appleby at his worst. I recognise that some large organisations will be able to put in place the systems needed to handle this process, but hon. Members will understand, having listened to all that, that to ask small or even medium-sized businesses to try to work their way through a six-step, three-formula, two-page regulation process is entirely unreasonable. Given that the Treasury got the formula wrong, could the Minister tell us how on earth a humble taxpayer is expected to cope? Will she assure us that when businesses— not surprisingly—make reasonable errors in this form of calculation, there will be no attempt to impose fines?
	There is also a wider point of principle. Is it not inherently unfair for a tenant facing a large and inflationary rent rise, for reasons outside his control, to incur a substantial liability for this tax at the same time?
	Will the Minister clarify paragraph 10, on page 20, which relates to substantial performance and the implementation date? Many in the property and, indeed, the business world fear confusion over which leases will and will not be affected. Will the Minister give examples of transactions covered by the paragraph?
	I have not been able to deal with the whole range of areas in which errors or ambiguities might arise. The Minister has been very reasonable so far. Will she confirm that if the regulations are found to have further defects, she will come to the House in person and explain what has happened? We do not want a written ministerial statement; people outside are very concerned and want to hear exactly what the problems are.
	May I be the first to congratulate the Minister on the regulation that amends schedule 5? I thought that the quality of her spin was magnificent. Alastair Campbell would have been proud. As she explained that the tax burden would not be too onerous, it seemed that if we listened carefully enough we would hear the sound of business men dancing in the streets in unalloyed joy at the generosity of Ministers. But, as was pointed out by the hon. Member for Yeovil (Mr. Laws) and others, despite all the warm words and soothing assurances the order represents not a reduction but a fourfold increase in tax revenue, from £50 million to £230 million in a full year.

George Osborne: My hon. Friend is making a powerful speech. I have a constituency interest in Marks and Spencer, as one of the largest and most successful branches in the country is in my constituency. The head of its tax group has said:
	"The new lease duty regime . . . will increase our anticipated leasehold transaction costs by a factor of 8 over the next six years. This type of increase, which is standard for the sector, will inevitably have adverse economic effects".

Mark Prisk: I met him this morning, along with a number of other representatives of business organisations. His case is typical of the problems faced by businesses.
	I must say, to be fair, that the regulations have managed one significant achievement: they have brought businesses together as never before. This morning the shadow Chancellor and I hosted a press conference jointly with seven leading business organisations, including the main consultees who met Inland Revenue representatives and the Chief Secretary over the summer. We did so because the regulations have united businesses in opposition to the Government's plans. Miraculously, they have brought together landlords, tenants and professional advisers, who have joined the Conservative party—the official Opposition—to challenge this stealth tax, not just because of the extreme rises such as that mentioned by Marks and Spencer, but because of the impact it will have on business mobility, business investment and jobs.
	The Minister spoke of the consultation that preceded the order. Let me tell her the views of the consultees whom I met this morning. All reject the Government's plans. They believe that the consultation itself was a sham. On behalf of Business in Sport and Leisure, Hugh Siegle said:
	"We have fallen over ourselves this summer to work with officials from the Treasury and Inland Revenue, to try and find a solution. They just have not listened and see Stamp Duty as a revenue raising measure."
	How right he was.
	In practical terms, this regulation will restrain business investment and severely distort the property market by favouring short leases. Information from property experts such as the Royal Institution of Chartered Surveyors shows that longer leases of 15 to 35 years will be taxed the most. A typical 25-year lease faces a possible sevenfold increase, and a 35-year lease faces an almost ninefold increase. And as was pointed out earlier, Marks & Spencer expects an eightfold rise in its tax bill. Gary Grant, managing director of The Entertainer toy stores group, told me that for just one planned store expansion in south Wales his tax bill will rise sixfold to £6,000.
	The licensed trade faces a similar problem. Because of high set-up and fitting-out costs, the average leasehold pub has a lease length of about 14 years and an annual rent of about £30,000. Such a lease will be subject to a duty of £1,776—almost 300 per cent. more than the current rate. Indeed, the British Beer and Pub Association has reported that almost a quarter of all leases in the pub sector are currently of 30 years in length. The average rent for those leases is £39,000 per annum. Current lease duty is £800, but to renew a lease on the same terms under stamp duty land tax will now cost £5,673. That is £4,873 more—or in excess of a 700 per cent. increase.
	Nick Bish, head of the Association of Licensed Multiple Retailers, said to me today:
	"As they stand at present, the proposals would create major distortions in the market for leasing, dramatically increase the costs faced by businesses dependent upon leasehold property, threatening ongoing investment, business expansion and jobs. Moreover, stamp duty"—
	on land tax—
	"would become a major capital cost when setting up a business, creating a . . . real barrier to entry for individual tenants and small pub companies."
	Why has the Treasury chosen to ignore the expressed views of its outside consultees? Why did the Revenue refuse to change either the thresholds or the peculiar discounting rate that it has chosen? Can the Financial Secretary tell us today which of the six trade bodies that were consulted have backed her proposals? Does she not accept that her Department's consultation has been a shambles? When every consultee rejects the result of a consultation, surely something has gone badly wrong.
	The regulations before us represent not, as the Financial Secretary said in her written statement, another step forward in modernising stamp duty, but two steps back for business. First, they impose a fourfold tax hike that is unfair to businesses and sectors alike. Secondly, this is a bad, ill-conceived and ill-considered tax that is being rushed through Parliament expressly against all independent advice.
	I am aware that these regulations are temporary and may have to be rewritten back into the next Finance Bill. I therefore ask the Financial Secretary to listen to the complaints and concerns expressed, and now to commit herself to revising her plans for next year's Bill. Both business and my party will continue to campaign for a fair deal on this issue. It is now time that the Government responded.

David Laws: I join the hon. Member for Hertford and Stortford (Mr. Prisk) in welcoming back the Financial Secretary, although I appreciate that she has been back at her desk for some time now. She must have hoped when she was away, however, that by the time that she returned to her desk to deal with the outcome of the consultation, some of the heat would have gone out of this subject, which was the cause of great concern when the Finance Bill was debated earlier this year. She will be aware that, as the hon. Gentleman has just said, she and the Government have not succeeded in satisfying the professional, business and other groups that expressed concern at the Government's proposals earlier this year. Indeed, the chairman of the Institute of Indirect Taxation's stamp taxes committee said the following in a letter to her of 24 October:
	"We note that this consultation has generated vigorous differences of opinion and approach between the Government, on the one hand, and the professional and commercial bodies who participated in the consultation, on the other."
	It seems as if the Financial Secretary and the Government have been entirely unsuccessful in addressing the concerns of professional and commercial bodies in relation to this matter.
	The impression was created in the Financial Secretary's speech a few moments ago that the Government were seeking to deal with several anomalies and unfairnesses in the existing system for dealing with leases and their taxation. However, as has been pointed out, the net effect of the measures that the Government are pressing through will be a significant increase in the tax burden on business. Although the Financial Secretary rather rattled off the numbers in the same way that the Chancellor of the Exchequer is inclined to do when revealing to the House increases in borrowing figures, I thought that I detected the admission that in the coming financial year the measures that we are debating today will raise some £170 million, even after the Government's concessions. The full-year cost of £230 million was mentioned earlier. If I have those figures wrong, I would appreciate the Financial Secretary's clarification later.

Mark Simmonds: Is the hon. Gentleman aware that the British Retail Consortium has assessed that the cost to its retail members will be £200 million alone, so the estimates provided by the Chief Secretary and the Financial Secretary grossly underestimate the real cost to businesses in this country?

David Laws: The hon. Gentleman is right that that is the assessment of business bodies. We will have to deal with that serious underestimate in the next few months. I hope therefore that the Government will eventually change their minds on the proposals.

Jonathan Djanogly: Is the hon. Gentleman aware that there are implications for sectors other than business? The pensions industry is now only just cottoning on to the fact that transfers between members' retirement benefit schemes will also be caught, so pensions will be affected.

David Laws: The hon. Gentleman is right that the proposals will be another blow to pension funds, which are already struggling as a consequence of recent changes in asset prices.
	Without straying off the specific issue before us today, the background to the debate is obviously the concern among business about the overall level of business taxation in this country. The Financial Secretary will be aware of the report issued by the CBI recently, which compared business taxes in several different countries. The Government reacted in a robust and agitated manner to that report, but it was useful for highlighting the fact that, although our corporate tax levels and rates—and, to some extent, the social costs on businesses—are lower than in many of our European competitor countries, we have much higher taxes on property and transport costs, for example, which must be taken into account. The net increase in business taxation contained within the measures before us is highly unwelcome to business.
	The Financial Secretary will be aware of the strong comments that the CBI made about the amended proposals that the Government have brought forward. A couple of weeks ago its press release talked about the "mass opposition" of companies in this country and complained about the Government pressing ahead despite that opposition. It said that the Government's decision
	"would drive up prices, cost jobs and damage regeneration".
	The CBI also said that the Government are underestimating the potential cost to business of this measure, and it states explicitly that the Government are
	"understating how many leases will be affected and overestimating the present value of leases."
	The hardest hit, as the hon. Member for Hertford and Stortford (Mr. Prisk) has already mentioned, will be particular sectors in which there are long leases—for example, the retailing and consumer services sector, many pubs and restaurants.
	The director general of the CBI commented on the Government's latest proposals:
	"It's extremely disappointing that the government, in its inexorable search for new areas to tax, is targeting the one sector that has kept the economy afloat: the high street . . . The majority of business premises are leased and duty increases on this scale will be damaging. This tax hike could easily swing the balance against marginal projects . . . Long term investment will be hit as firms look for shorter leases."
	Surely, in the light of that criticism from business, the Financial Secretary must look again at the measures, especially at their net impact on business as a whole, rather than giving us the impression that they are simply designed to reduce avoidance and to tackle unfairness within the existing tax structure.
	The hon. Lady must also address the fact that the measures hit particular sectors extremely hard. We have already heard examples of the effects on the leisure industry in particular constituencies, and reference has been made to Business in Sport and Leisure, an umbrella organisation that represents more than 100 private sector companies in the sport, leisure and hospitality industry. That organisation has pointed out that many parts of the leisure industry face an eightfold increase in stamp duty under these proposals. It cannot be the Government's intention to increase business taxes in such a penal way for some parts of the business sector. Business in Sport and Leisure stresses that there has been no suggestion from the Inland Revenue that the sector is involved in any avoidance of tax, so it cannot be the case that the Government designed the measures simply to capture tax avoidance.
	The impact of the measures will be especially acute in those sectors where there are long leaseholds. Obviously, that is relatively common in the leisure sector, where there are leases of between 20 and 25 years due to the high cost of investment in leisure properties and the need to refurbish them regularly. For that reason, there is concern about the unfairness embedded in the measures. The tax increases will fall especially hard on some sectors and the Financial Secretary seems to have done nothing to address that concern. I hope that she will attempt to amend the proposals in future so that those hard-hit sectors will not be so severely affected. Although the hon. Lady said that about 60 per cent. of businesses will be exempt from the increase, she will be aware that in the leisure sector the figure will be 30 per cent. or less, as a consequence of the thresholds that the Government have set.
	We must also consider fairness between different parts of the country. Earlier, the hon. Members for Taunton (Mr. Flook) and for Bridgwater (Mr. Liddell-Grainger) were in the Chamber. Their presence made me realise that there was a Somerset phenomenon in terms of unfairness, although the phenomenon goes well beyond Somerset. Can the Financial Secretary confirm that a leisure business—for example, one in the eastern part of my Yeovil constituency, quite a deprived area—which is above the threshold and affected by the totality of the Government's proposals on stamp duty land tax on leases, will pay increased taxation; yet for businesses in other parts of the country, such as a pub in Canary Wharf or Harvey Nichols in Leeds, there will be no increase in taxation because deprived area relief will interact with the measures?

Mark Simmonds: The hon. Gentleman makes a good point. Is he aware that deprivation is measured on residential areas and not on the amount of commercial activity that takes place? That would create anomalies; for example, removing all the stamp duty from the Meadowhall shopping centre, just outside Sheffield, would add £50 million to its value—equivalent to 1p on the net asset value of the share price of the company that owns it. That is neither a sensible nor a wise use of public money.

David Laws: The hon. Gentleman is right. He echoes the comments made by the Lords Committee on the Finance Bill. The House of Lords Committee urged the Government to reconsider the measures before the House today, and to look at how the deprived area relief interacts with them. It makes no sense that a leisure business in a deprived part of Yeovil should suffer as a result of the proposals, when a pub in Canary Wharf serving well paid investment bankers or a major department store in Leeds remain exempt. That is irrational.
	The hon. Member for Hertford and Stortford (Mr. Prisk) mentioned many of the detailed concerns about the proposals felt by businesses and professional organisations, and I shall not repeat them. My criticism, and that of my party, is that the proposals represent a significant tax increase for business, and hit specific sectors very hard. There is no good economic rationale for hitting businesses with long leases, unless the Government are determined to change the maturity structure of leases. However, there seems to be no good reason to do that in the leisure sector. We also consider the proposals to be unfair in the way that they affect businesses in deprived areas.
	The Government held a consultation and listened to the results, but they do not seem to have heard the points made by business. It may be too late to get them to change their mind today, but I hope that the Financial Secretary will return to these matters in the future. At present, the Government have got the proposals wrong.

Stephen Dorrell: I begin by declaring a personal interest. I am a director and shareholder of a trading company that occupies leasehold property. As far as I know, we are not involved in renegotiating any leases, so I do not anticipate that the proposals would have any immediate effect. However, at some time in the future I could have a direct personal interest.
	The Government say, euphemistically, that they want to modernise stamp duty. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) made a compelling case against the policy, in terms of detail and, more importantly, of strategy. What the Government describe as modernising stamp duty is, in fact, a policy of raising extra revenue through a new tax structure that they hope that voters will not notice.
	We in this House have a responsibility to look beyond the immediate effect on voter perception and to consider the economic effect of the Government's tax policy. My hon. Friend the Member for Hertford and Stortford was right to say that the Government have ambitious spending plans and want to raise revenue without voters noticing. For that reason, they are looking for opportunities to use tax policy to squeeze extra revenue out of parts of the economy that they hope that voters are unaware of. However, getting extra revenue from stamp duty will do substantial economic damage, along the lines described by my hon. Friend.
	The Minister herself identified why stamp duty is an especially damaging tax. She said that the reforms would remove cliff edges from the operation of stamp duty. Yet stamp duty is a cliff edge in itself—that is the nature of a tax on capital transactions. Cliff edges cannot be removed from it. In a nutshell, that is why the Government are wrong to use this tax to close their revenue gap.
	The more tax that the Government raise out of capital transaction taxes, the more distortions they build into the economy, and the more economic damage is done. My hon. Friend the Member for Hertford and Stortford was right to focus attention on the effect that taxing new leases will have on encouraging urban regeneration and the establishment of new businesses. If we tax something we make it less likely to happen. That is one of the basic rules of economics. The Government are putting up taxes on urban regeneration and new business creation, and we must assume that they understand that the likely economic effect of their policy will be less urban regeneration and less new business formation, especially in the leisure industry.

John Taylor: Does my right hon. Friend recall that when Lord Lawson was Chancellor of the Exchequer and halved the rate of stamp duty, he doubled his revenue from that source?

Stephen Dorrell: My hon. Friend is right—although he will probably remember that there were some secondary effects, which at the time were controversial. None the less, that example is a clear illustration of the principle that reducing the rate of tax on something tends to increase the activity, and increasing the rate of tax on something tends to reduce the activity. That is what the Government must be assumed to be planning as a result of this policy, and that is the fundamental objection to it.
	I shall make two other points about tax policy, and explain why I think this tax is even worse than other forms of capital transaction tax. My first point is that when a new lease is taxed, what is really being taxed is a prospective revenue flow. Inevitably, an estimate has to be made. If both parties to the lease go under as a result of signing it, huge damage will have been done, but the Government will in the meantime have made off over the hills with their sack of gold. To tax a prospective revenue flow is to tax something that is particularly risky within the spectrum of economic activity.
	My second point is that if we choose to focus on that tax base, we introduce a huge incentive for people to distort their estimates. Listening to the Minister justifying this draft of her policy, I noticed that she was describing the introduction of a tax system that already, before the structure comes into effect, the Government recognise will be riddled with avoidance and tax planning opportunities.
	When I held the Financial Secretary's job, I learned that whereas in my previous existence—I am happy to say that this also applies to my present emancipated existence—I was allowed to call such activity tax planning, in her rather sterner existence she has to learn to call it tax avoidance, and sometimes tax evasion. No doubt she is better than I was at remembering the difference between those two. One is legal, and the other is not, but I could never remember which was which.
	Introducing a new higher tax on an uncertain future revenue flow condemns us, without peradventure, to a new industry of tax planning experts, who even now, in the big accountancy firms, will be planning ways in which their clients can avoid the tax that the Financial Secretary is introducing. I guarantee to the House that, as with capital gains tax, the further this policy goes on, the more the Treasury will come to the House year after year with page after page of what it will describe as anti-avoidance legislation.At the moment, the phrase used is "abnormal rents"—but what the Treasury describes as abnormal rents is today's normality. When we tax today's normality, that creates tomorrow's abnormality, because that is where the tax planning industry will go.
	I congratulate my hon. Friend the Member for Hertford and Stortford on the case that he has made against the measure. It is objectionable because it will introduce a new and higher rate of tax on something that we should be encouraging, and because the only thing that the new set of taxes will encourage is the tax planning industry and the big accountants, who must even now be rubbing their hands with glee.

Jonathan Djanogly: I wish to declare an interest in rented property.
	Everything that I have read or heard about the regulations on stamp duty land tax points towards a Government who have failed to listen to the representations made to them by almost everyone who takes an interest in the issue. To my mind, we are now cruising towards the onset of a disaster, which is what will occur when the tax takes effect in what is now not many days' time. I therefore fully support my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) in once again asking the Government to reconsider their position on the tax.
	In short, it is my contention that the main result of the tax as amended by the regulations will be to increase hugely the stamp duty payable on leases and unnecessarily to increase the complexity of the calculation of tax, despite the provision in the regulations to vary the way in which it is calculated, which I believe will make the process even more complicated. In particular, retailers will be penalised and people in industry who want to enter into long-term leases will have to opt for short-term leases instead, depriving them of the security and certainty that they would otherwise have. That is not in the interests of British industry. I also wish to suggest on the basis of the regulations that this tax is the precursor to a massive Labour tax-raising exercise on property.
	The Government seem to maintain that the ending of stamping leases will somehow simplify the system. While I agree that that may be a precursor or a necessity in respect of their proposals for electronic conveyancing, I regard the suggestion that the tax will become simpler to administer as defying belief.

Mark Prisk: My hon. Friend referred to e-conveyancing, which is an important issue. Is he aware that the tax forms can now be submitted only in a handwritten form? Does he share my concern that that is a step backwards in terms of e-commerce?

Jonathan Djanogly: My hon. Friend is right. I shall return to the form itself, as the regulations deal with it in passing, but not as they should do, which is a particular concern.
	The formulae that the process now involves are making most professionals' eyes water. Indeed, I have heard from professionals that they simply cannot calculate them without using a computer programme. For most business men, the formulae have become a mystery. Unfortunately, that mystery is having a harsh impact, as up to 15 times as much is being paid at the end of it. The changes relating to the proposed charging of a 1 per cent. minimum will only make the matter even more complex.
	The Government also seem fixated on the idea that the new tax is required to tackle tax avoidance and to ensure that everyone pays a full share. Indeed, the Financial Secretary keeps using the word "fair". For the majority of traders, however, the acquisition of a lease is simply a necessity in conducting their business, rather than a means of tax avoidance. In any event, over recent years, the inventiveness in the use of stamp duty avoidance schemes has been part of businesses' reaction to the no fewer than five previous stamp duty increases that we have seen since Labour came to power. Under the Conservatives, stamp duty was 1 per cent. on amounts of more than £60,000, and that was generally seen as acceptable. However, as the level has been ratcheted up, many companies have increasingly been forced to consider using avoidance schemes to avoid the rates of tax that have started to make their deals appear uneconomic.
	Scrutiny of this new tax has been haphazard to say the least, as my hon. Friend the Member for Hertford and Stortford pointed out. The original consultation was conducted unfairly, not least because of the Government's decision to abruptly end it in early January this year. Then, because of the Government's unfairly short timetable for the Finance Bill, we did not even talk about this tax in Committee. It was only on Report that we addressed it for the first time, at which point the Government tabled more than 40 amendments. That alone shows that they do not have a handle on this tax.
	The Government admitted that they did not know how the tax would work and said that they would reconsult over the summer, which has led to the orders that we are discussing today. As I mentioned earlier, further consultations are continuing, especially in relation to partnership, on which the Government have admitted that they need to start again from scratch. On Report and earlier today, we have gone into various technical aspects of the new taxes and highlighted various failings of the legislation. I have made the point that the new taxes will increasingly be unacceptable to professionals and business people alike.
	The Government reconsulted over the summer and it is worth reviewing some of their comments. The verdict from pretty much everyone who was asked about the proposals was "zero points", and I shall address some of the technical points that were made. In a recent article in the Solicitors Journal, a Mr. Nock, a barrister, said that
	"the Government intends, lemming style, to rush headlong into bringing in stamp duty land tax on 1 December despite the many deficiencies in the Finance Act 2003. It appears the Government accepts it will take up to two years to discover the major defects and put them right, but is prepared to leave taxpayers and their advisers to live with the mess in the meantime."
	If Mr. Nock is right, and having heard the debate today I fear that he is, how can it be acceptable that the Government can pass legislation that they know will not work? Mr. Nock gave the example of monthly or other periodic tenancies that are subject to tax as if they were a lease for a term of 12 years. However, if drafted as a lease for one month and thereafter from month to month until terminated by notice, the tax is assessed on the basis of a two-month lease. As Mr. Nock continues:
	"Hundreds of . . . potential professional indemnity risks abound in the current legislation."—
	I declare my interest as a solicitor—
	"It is to be hoped, although not with any great degree of confidence, that the Inland Revenue Stamp Taxes Office will seek to apply the legislation contrary to the letter in most cases to produce a reasonable result."
	That is a dramatic comment, because it means that if the Government are to be fair to taxpayers, the tax man will have to apply the law loosely. That will hardly be a comfort to most business people. Mr. Nock continues:
	"In the paranoid pursuit of anti-avoidance rather than technical precision in setting the conditions for relief, transactions that were previously non-eligible for relief are now potentially exempt. The grant of a new lease 'in connection with' a company reconstruction, if part of an undertaking, is exempt or eligible for the lower rate even in the case of rent. Practitioners must therefore bring open minds to much of the legislation and not be too influenced by apparently similar stamp duty provisions. Clearly, these newly created reliefs have the potential for tax mitigation that would not exist with even moderately sophisticated legislation properly drafted."
	My right hon. Friend the Member for Charnwood (Mr. Dorrell) made a similar point in his excellent contribution to the debate. So there we have a tax barrister saying that the new legislation, which was introduced to counter avoidance, could attract avoidance schemes because of its complexity.
	Many other technical issues arise in relation to the orders. We could see an increase in negligence claims against professional advisers, with the consequence of increased costs for clients. That could happen because many entries in the land transaction return require valuations or estimates and, because it is a self-assessment tax, judgments will be required on such matters as market value, market cost and estimates of what is likely to be produced by variable consideration. That will put a lot of pressure on the professionals.
	Certain actions—for example, substantial performance, such as the payment of rent or entering into the possession of property without any formal grant—are not notifiable, even though no SDLT is payable by reason of the low rent, and even though the grant of the tenancy may not be notifiable. The rules on notification in the case of the acquisition of freehold or leasehold interest in property might necessitate multiple notifications.
	For example, where a developer acquires land and, without taking a transfer, enters into possession of the land, having paid the purchase price, he will be required to make a return. A fresh return may then be required each time a plot is sold or leased to third parties. In some cases, both the developer and the purchaser, or tenant, will be required to file returns. Of course, the term "acquisition" also includes releases, surrenders and variations—so more form filling and more red tape. Nothing in the schedule to the order will deal with that, as my hon. Friend the Member for Hertford and Stortford has said.
	Service charges are not subject to this new tax, provided that they are not included as part of the rent. However, if they are taxable as rent, and since service charges are variable, an uncertain rent will be produced, so the tenant will be obliged to notify the stamp taxes office every time the landlord increases the service charge—again, more red tape, more hassle.
	The complexity and length of the land transaction return might well increase in the light of the publication of regulations in the near future. Some professionals have made it clear that although the Revenue is currently attempting to make the form appear short, it is deceptive and advisers should take care not to be misled by the simplicity of the form.
	Only a couple of weeks ago, Mr. Gordon Keenay of KPMG Stamp Taxes Group, who happens to be a former business director of the Inland Revenue stamp taxes office, noted:
	"The downside on the legislative front, though, is the unprecedented breadth of the powers to modify this tax by Statutory Instrument. The Government ought not to use it as a more painless way to change the tax rules than waiting for the next Budget."
	We will increasingly see a series of Statutory Instrument Committees, digging the Government, bit by bit, out of the mess that this tax has already been shown to be. Of course, we are seeing something similar to that happening today.
	The problems with the orders go far beyond the technical. Other hon. Members have referred to important practical points. Yes, there is complexity. Yes, there is bad drafting. Yes, there are technical weaknesses. However, a whole host of practical issues have been raised, particularly by business people. The British Retail Consortium has been mentioned, but the director general has also noted:
	"The Government has ignored all our advice and seems determined to hurt the very sector which is keeping the economy afloat at the moment."
	Digby Jones, the director general of the CBI has said:
	"Duty increases on this scale will be damaging. The Chancellor must promise an early review of the effects of this legislation."
	I have a feeling that, because of all the debate that is going on, there will be regular reviews of this legislation, but not for reasons that the Government particularly want. Digby Jones also cited an example of a retailer, leasing a shop for 25 years at an annual rent of £120,000, who would now pay £2,400 in duty. Under the new rules that retailer would pay about £19,000, so the new £1,500 reduction, as proposed in the order, is not a sizeable relief in the context of the deals that businesses actually do. What we have seen over recent days is business people trying to understand where the Government are coming from in relation to the orders and this new tax, as it all seems nonsensical. Mr. Griffin, the head of stamp duty at Ernst and Young, said that the inevitable conclusion is that this is a political fudge.
	We know that pubs, retailers and restaurants in particular will be hardest hit by of the tax. One of the reasons for that is that they typically take long leases of 20 to 35 years to amortise the multi-million pound cost of fitting out their buildings over the duration of the lease. The British Retail Consortium, too, has said that it reckons that about 74 per cent. of retailers will look to get shorter leases.
	What about the Government's new concession in the order? A lot has been said about it, and I will not go over new ground. It is important to make the point, however, that the Government's figures are consistently being seen as underestimates by business. B & Q in particular expects that the average cost of its lease per store will increase from £35,000 to £285,000 because of this regulation.
	With seemingly everyone either opposed to or critical of this new tax, what is behind it all? Mr. Griffin addresses it in the context of the new form, which was discussed by my hon. Friend the Member for Hertford and Stortford and is touched on in paragraph 6 of regulation 3. He notes:
	"Whereas the old stamp duty form was a one-page document, which took solicitors five minutes to complete, the new form will run to eight pages, with a further 30 pages of explanation."
	He says that the new form is effectively an "an information-gathering exercise." He says:
	"It's an ideal platform for the chancellor to introduce a wave of property taxes . . . The Inland Revenue will compile a vast database of residential property . . . This system gives the chancellor enormous flexibility for future changes to stamp duty, and a launchpad for an array of new property taxes."
	That gets to the nub of why we are here today. We are at the start of a massive Government offensive against property and property owners. They are going to start it through stamp duty, but they will use the build-up of information on the new forms to extend it across other sectors of property and the economy. Today, we are seeing only the start.

Mark Simmonds: Before I begin, I want to draw the House's attention to my interests, which I have declared in the Register of Members' Interests. I join my colleagues and others who have welcomed the return of the Financial Secretary to the Front Bench—it is the first time that I have taken part in a debate on this topic when I have had a feeling that at least somebody on the Treasury Bench understands and takes this matter seriously. That is not the conclusion that I have reached in relation to her two colleagues who have partaken of these debates previously.
	I have spoken at length on this topic in previous debates, but I have no desire to continue at length today. Suffice it to say that I do not agree with this additional tax. It is not about closing loopholes, as the Financial Secretary and her colleagues have said previously. It is purely about raising additional revenue. It is nothing to do with modernisation; it is about trying to fill the gap in the Treasury finances created by the disparity between the increase in public expenditure and the reducing revenues coming into the Treasury.
	The first point of contradiction that I want the Financial Secretary to explain relates to why, initially, the Chancellor and his Treasury team said that these measures would be revenue-neutral. The Treasury then gave a figure of £250 million, which was reduced to £230 million, and I understand from her opening remarks that it is now £170 million. As I told the hon. Member for Yeovil (Mr. Laws), the figure from the British Retail Consortium—which relates to retailers who are members of that organisation, and not the totality of retailers in the United Kingdom by any means—is £200 million alone. That ignores businesses in the industrial market and the office market and businesses that take out smaller leases in different sectors, including the licensed premises sector and the restaurant sector.
	The Government appear to believe that all leases are tax-avoidance schemes, but that is simply not true. As my hon. Friend the Member for Huntingdon (Mr. Djanogly) said, businesses need leases to create flexibility and ensure that their capital is not tied up in property so that they have spare capital to invest in opening new stores or expanding their factories or office premises, which generates additional employment and allows them to go forward. The briefing for the debate written by the Royal Institution of Chartered Surveyors supports that point.
	It is worth pinpointing several serious side effects of the measures, although I have highlighted them before. The Association of Licensed Multiple Retailers has produced pertinent statistics that we should all take on board before deciding whether the additional tax will be good for the economy, businesses and jobs. Its survey shows that the impact of the new lease duty will mean that 85 per cent. of retailers will not invest in certain areas, 80 per cent. will limit expansion, 61 per cent. will want shorter leases and 40 per cent. will cut jobs. If that would not be serious for the economy, I do not know what would be. We would have to cope with that in our constituencies. Marginal sites will be hit and such sites tend to be in areas with socio-economic deprivation. We need to regenerate those areas, not hit them hard with additional taxation.
	The measures will affect employment. The retail sector employs a significant number of people in our constituencies. Some 5,500 people—12 per cent. of the work force—are employed in the retail sector in Boston and Skegness, which is a slightly higher percentage than average. In East Ham, 23 per cent. of the work force are employed in the retail sector and the figure is 24 per cent. in Thurrock—one in four people are employed in the retail sector in that constituency. The measures will have a dramatic impact on job creation and sustainability in the retail sector. They are diametrically opposed to what the Government have been talking about, although such contradiction is not peculiar, because they go against a flexible, entrepreneurial and dynamic economy.
	I have asked several specific questions about the measures before but no answers have been forthcoming, so I hope that the Financial Secretary will answer them in her winding-up speech. How did the Government arrive at the net asset figure of £150,000 because no one seems to know where the figure came from? More appropriate figures have been proposed, such as the much more sensible threshold of £500,000 that was suggested by the consortium led by the CBI that wrote to the Financial Secretary during the summer. I was interested to hear her cite the results of the Investment Property Databank regarding the collation of the property market information. As far as I am concerned, it did not say that 60 per cent. of leases will be caught but that 98 per cent. of the value of all leasehold transactions in the United Kingdom will be caught by the measure—almost all leases. It has been argued that the average length of a lease is 10 years but leases are generally longer than that, especially those for prime properties. Therefore, if a lease had a net asset value of £150,000, the rent paid would be between £10,000 and £12,000 a year, which is low for commercial property these days.
	My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) mentioned the subject of my second question during his polished and articulate speech. Where does the 3.5 per cent. figure for discounted cash flow come from because it bears no relation to commercial practice? The team that was led by the CBI suggested alternative figures. One cannot borrow money commercially at an interest rate of 3.5 per cent. or issue bonds with a gilt yield of 3.5 per cent., so there is no correlation between the Government's figure and the reality in the marketplace.
	I was intrigued and surprised to hear the Minister confirm that 60 per cent. of leasehold transactions would be exempt. According to a written answer to the Leader of the Opposition, the then shadow Chancellor, that figure was 87 per cent. The British Retail Consortium says that only 30 per cent. of leases will be exempt. The British Property Federation says that no leasehold transactions will be exempt in the City of London. The Royal Institution of Chartered Surveyors strongly supports the IPD's view that 98 per cent. of the value of commercial leases will be subject to lease duty. I know whom I would believe.
	It is highly unlikely that the changes in stamp duty will be limited to increases of four to eight times. That will have a direct impact on the money that those with longer leases, up to 35 years, will be prepared to invest in new properties. I have in mind those who occupy retail warehouse units or those with licensed premises who need that length of lease to enable them to write off shop-fitting costs.
	Why did the Treasury reject the proposals alluded to or specifically suggested by the group led by the CBI? If we accept the need to tidy up or, to use the Treasury's term, modernise, then a graduated tax rate, an exemption threshold of £500,000 and an increase in the discount rate from 3.5 to 7 per cent. are eminently sensible ideas.
	The tax increase has serious implications for the commercial property market. Not only will there be market distortions, but shorter leases, which will inevitably affect the capital value of property and the capital and human investment that firms are prepared to make in their businesses. As my right hon. Friend the Member for Charnwood (Mr. Dorrell) said, it will reduce Exchequer yield because it will reduce and lessen economic activity.
	The tax increase will also affect the UK's competitiveness in the global economy. Retailers make decisions on an international basis. They do not necessarily decide just to go from one town to another. International retailers that are based in the United States, parts of continental Europe or the UK have branches abroad. The United States and Germany have no taxation on the granting of new leases, so we are making ourselves uncompetitive. Potential investors outside and inside the UK are worried about whether they should leave their money in this country as the commercial property market is hit.
	We discussed the impact on the UK property investment market, but it is not simply the traditional property investment sectors—retail, industrial and offices—that will be affected. The hon. Member for Chatham and Aylesford (Jonathan Shaw) made a pertinent point. The proposal will have significant impacts on tangential investment sectors based on the premise that, as the stamp duty takes a hold, leases will become shorter and capital values will be lowered. The only way to support the value if capital values decrease is by increasing rent, but as tenants cannot afford to pay increasing rents, some investors will withdraw from tangential sectors.
	The specific examples given to me of sectors that will be hardest hit are those that should most concern the Government. They include hospitals, nursing homes, learning disability units and brain injury units. The main investor in that market said that, if the stamp duty regime is introduced, it will withdraw from the sector, having a direct impact on the Government's ability to increase their public sector provision.
	The Treasury has provided an online calculator for small businesses. That is obviously on the internet. My constituency in rural Lincolnshire does not have broadband. People do not have access to such facilities. I hope that the Treasury has other ways to communicate with businesses and professionals to ensure that information is disseminated to the relevant people as soon as possible, especially in light of the fact that there are only 13 working days to go.
	When the rate increases are combined with property costs, the second biggest factor facing employers after wages, that challenges all the Government's lines on job creation and regeneration, which supposedly encourage a thriving, dynamic and entrepreneurial business sector. That does not fit comfortably with those reassurances. I am pleased that there is now some clarity in the orders, particularly regarding sale and lease-backs. However, it is not obvious whether, in the sale and lease-back proposals, the relief applies just to freehold to leasehold, or long leasehold to normal leasehold.

David Taylor: Surely the hon. Gentleman is aware that there is relief without limit for the conveyancing and leasing of non-residential property in disadvantaged areas. Could the Treasury not tackle the problems in his constituency and elsewhere by broadening the definition of those areas?

Mark Simmonds: The hon. Gentleman made an interesting intervention, but he may not understand a point made by both the hon. Member for Yeovil (Mr. Laws) and myself. A change would not necessarily help because the definition would still be based on the affluence or otherwise of the residential population, not commercial activity in those areas. It is ludicrous, for example, that an enormously affluent and successful business environment such as Canary wharf should be completely exempt. Meadowhall shopping centre just outside Sheffield is also exempt, adding £50 million to its value. I think that it equates to 1p for the net asset value of the company that owns it.

David Laws: The hon. Gentleman is making an effective point. Does he agree that the Government define many major city centres as deprived, so all the businesses in the area, even those selling to affluent shoppers, are exempt? In many other parts of the country, businesses are bearing a burden that they can ill afford to bear.

Mark Simmonds: The hon. Gentleman made a good point, and he is right. My understanding is that in Birmingham, Manchester and Leeds the whole city centre is exempt, which is not right, as other commercially disadvantaged areas will be hit by the proposals.
	There are two remaining issues that I would like the Financial Secretary to deal with today, or respond in writing if she does not have the facts at her fingertips. What happens if there is a 10-year lease with a three-year break clause? Is the stamp duty based on the length of lease up to the break clause, or on the entire lease? That would make a significant difference to the sums involved. I should like to have a much more detailed conversation about turnover leases, because I am not sure that the Financial Secretary understands how they operate, given her answer to my intervention, but I shall not ask about that now. However, what happens when a tenant takes a five-year lease in a shopping centre, trades for only one year, and then the shopping centre shuts? Do they get their money back? Is there a rebate system, or is it a case of the Government taking their whack, and it is just tough for the tenant? Such situations can arise in deprived areas.
	In conclusion, the orders make provision for a minimum eightfold increase, and will damage flexibility in the marketplace. They may lead to lower investment, reduced margins and job losses. Furthermore, the Government have ignored the consultation process. The regulations will have an unnecessary and negative impact on a vital area of the economy merely to correct the Chancellor's financial and fiscal irresponsibility. I very much hope, therefore, that the Government will reconsider their proposals.

Ruth Kelly: With the leave of the House, Mr. Deputy Speaker, I shall wind up our debate on the regulations. It is worth reminding hon. Members why we introduced the reforms in the first place and on what basis we did so. The reform of stamp duty land tax is a wholesale reform of tax on land transactions, and is not something that hon. Members should shy away from. It is a long overdue tax reform, which was welcomed in discussions of the Finance Act 2003 as a much-needed measure to modernise the system.

David Laws: Do any professional or business bodies welcome the proposals as they stand?

Ruth Kelly: I am putting these lease duty proposals in the context of the broader package to reform stamp duty—an absolutely essential, but complex, tax reform that previous Administrations long shied away from. Reforming tax on leases, specifically on their rental element, is an integral part of that root and branch reform.
	The right hon. Member for Charnwood (Mr. Dorrell) argued—to put it in one sentence—that he could not support an increase in the rate on leases because stamp duty is a transaction tax. I recognise his point, but the reality is that Governments of all persuasions, in many countries, have used stamp duty as a cheap and efficient way of raising revenue. Indeed, many countries have far higher levels of stamp duty than those currently operating in the UK. Given that stamp duty embraces an important quantum of revenue, it must be right to address anomalies, distortions and avoidance.

Stephen Dorrell: rose—

David Laws: rose—

Ruth Kelly: I want to finish my point before giving way.
	Stamp duty land tax does just that. It ensures that the tax is fair to all taxpayers, including those who were previously avoiding it. The charge on new leases is an integral part of that, as leases represent an interest in land.

Stephen Dorrell: The Financial Secretary seems to be arguing that although she recognises that capital transaction taxes cause distortion, because other countries have them we should feel free to close our revenue gap by increasing the yield from precisely those taxes. Can she explain her case a little further?

Ruth Kelly: Is the right hon. Gentleman arguing for the abolition of all capital taxes? If so, where would he raise the revenue from?

Stephen Dorrell: All taxes distort; but in raising revenue, we should recognise that the more we raise taxes based on capital transactions, the more economic damage we do. That should be an even further incentive on the Treasury to begin to exercise some control over public expenditure.

Ruth Kelly: I am sure that we could debate this subject for hours, but this is not the appropriate forum in which to do so. It has long been accepted on both sides of the House that there is an argument for taxing transactions and interests in land. What we have done, and propose to do, is to modernise the way in which that tax regime operates.

David Taylor: Does my hon. Friend agree that the right hon.—and unjustly overlooked—Member for Charnwood (Mr. Dorrell) was wrong in one aspect of his critique of capital taxes, in that he suggested that they were innately cliff-edge taxes? That is not so if a graduated form is introduced. Might the Chancellor receive submissions to that effect?

Ruth Kelly: I have listened to my hon. Friend's comments, and I will draw them to the attention of my right hon. Friend the Chancellor.
	It is only fair that the granting and transfer of leases is also subject to lease duty where transactions and transfers are subject to that tax.

David Laws: Will the Minister give way?

Ruth Kelly: I want to make some progress: I shall give way in due course.
	The distortions apparent in stamp duty, where the rate of duty is increased at eight and 36 years, are not a feature of stamp duty land tax. The tax is charged at a flat rate of 1 per cent. of the net present value over the relevant threshold. A business takes into account the economics of the transaction when it enters into it. Stamp duty land tax places a value on the benefit received by a business entering into a lease transaction using lease length and rental payments as determining factors. That is no different from modern valuation and accounting practice. For example, the International Accounting Board is to recommend that all leases are shown as assets on the balance sheets of companies that have them. Stamp duty land tax uses a method to calculate that value, then applies a tax rate to it.
	The proposed structure for taxing lease rentals is more in line with the structure for taxing freeholds, but it acknowledges that leases are not the same as freeholds because the rate is set at a flat 1 per cent. instead of being dependent on value. That contrasts with the old stamp duty regime, which it replaces. It determined tax rate by the term of a lease. To assist smaller businesses and start-ups, the new regime taxes only the excess value over the appropriate threshold.

David Laws: I do not know whether I heard the Financial Secretary correctly earlier. Will she confirm that she gave an indication to the House that, in tackling the distortions and threshold effects in stamp duty, she will actively consider them in the residential market? The latter arise as a consequence of the application of stamp duty thresholds. Will she introduce proposals to deal with that in the next pre-Budget report?

Ruth Kelly: I shall take the hon. Gentleman's comments as an early Budget representation and convey them to my right hon. Friend the Chancellor.
	In determining the form of stamp duty land tax, I have been acutely aware that the reforms are not welcomed by the whole leasing community. Conservative Members have made comments to that effect. However, the reforms will exempt far more leases from the duty than the old stamp duty regime. In my opening statement, I made it clear that 60 per cent. of all leases would be exempt from stamp duty land tax. I listened to the comments of the hon. Member for Boston and Skegness (Mr. Simmonds). Although I understand that the IPD said that 98 per cent. of the value of leases will be subject to tax—I have no reason to dispute those figures, which are consistent—it underlines my point that small leases and start-ups will be exempt from the impact of the tax. We specifically designed it to be consistent with a small business agenda.
	As I said earlier, 93 per cent. of leases in the residential sector will be exempt from the tax. In the Budget, my right hon. Friend the Chancellor offered more consultation with the industry and we undertook precisely that. The process provided much valuable information on the leases that businesses take out. For example, for the first time, we had genuine data on sale and lease-back transactions. Those data informed our subsequent judgments.
	The consultation was fully taken into account in the decisions on the new regime. Through the consultation process, we could preferentially target small businesses and start-ups to ensure that they were significantly less likely to face an increase in tax from the measures and that most small businesses would be exempt from the tax.

Mark Prisk: Will the Financial Secretary give way?

Ruth Kelly: I must make some progress because time is passing.
	Earlier, I outlined the five principles against which we would test any measures that were proposed in the consultation process. I do not propose to repeat them. We did not receive a significant representation that fulfilled the tests. The hon. Member for Boston and Skegness mentioned the CBI proposal that received much support from the industry. It was one of several comprehensive proposals that were considered in detail. Although it claimed to be simple, it reintroduced a stepped duty rate and extended it over 40 years. That is a step backwards from modernisation and reminiscent of the old stamp duty regime.
	The CBI proposal also used a discount rate of 7 per cent. For short leases, that makes little practical difference to the net present value, which is calculated using a discount rate of 3.5 per cent. The main effect of a 7 per cent. discount rate would be on longer leases, which larger, more mature businesses, rather than start-ups and those with smaller value leases, typically take out. We consider that the longer the term of a lease, the more like a freehold it becomes. Given that the tax is set at a flat rate of 1 per cent.—a quarter of the rate of tax on freeholds—I could see no justification for lowering the discount rate on the longer-term leases.
	Earlier, I also explained why 3.5 per cent. represents a risk-free rate.

David Laws: Does the Financial Secretary accept that a specific sector—the leisure and pub sector—has a problem with the proposals? The nature of the business means that members of that sector have long leases. Does the Financial Secretary accept that the vast majority of businesses in that sector will be hit? Will she therefore agree to reconsider the effects on it?

Ruth Kelly: I am sure that the hon. Gentleman will understand that it is not possible to ensure that the measures will impact exactly equally on each sector across the economy, as each sector has its own particular requirements. I am confident, however, that in general the increase in the threshold will mean that, in most sectors, more businesses will be exempt from the tax than were exempt under the old stamp duty regime.
	The hon. Member for Hertford and Stortford (Mr. Prisk) mentioned the licensed trade sector. Representations from the licensed trade were made throughout the consultation process, and we are grateful for that input. From the information supplied by a representative body in that sector, we learned that very few leases in the licensed trade were exempt from stamp duty under the current regime. The effect of the increase in the threshold will be that more than 30 times the number of leases in that sector will be exempt from stamp duty land tax as were exempt from stamp duty. The introduction of the slide system will mean that a further 5 per cent. of such leases will pay less stamp duty land tax than they are paying under the current system.
	I shall try to address a few of the other points that have been raised today. The hon. Member for Huntingdon (Mr. Djanogly) argued that long-term leases would be penalised and that there would be a move towards short leases with less security. I would argue that our policy encourages flexibility in the lease market. Shorter leases provide a form of flexibility, and should that happen, it would be in line with Government policy. The hon. Gentleman made an important point about the security of businesses, but that is taken into account in the net present value calculation, wherein longer, more secure leases will have a higher net present value, reflecting that security, and will consequently pay more stamp duty land tax.
	Several hon. Members mentioned pension funds, and I think that I can lay their fears to rest. When there is a change in the trustees—in other words, when there is a transfer between different pension schemes—there is now no charge imposed by the stamp duty land tax. I hope that I can reassure Members that the measures should not have a direct impact on pension funds.
	The hon. Member for Hertford and Stortford asked whether the forms had been distributed, and I promised that I would return to that point during my winding-up speech. I have examined the forms closely, which I believe are currently being issued. Starter packs of forms are currently being dispatched to every relevant firm in the United Kingdom, and bulk orders are being taken by the Inland Revenue forms order line. However, if any solicitor or conveyancer should find themselves without a form, they can, as a fallback, get them from their local stamp office. I am not saying that I expect that to happen, but that facility exists, in case anyone is worried about that before the introduction of the new tax.
	I was very impressed by the level of very detailed knowledge that the hon. Member for Hertford and Stortford showed when examining the regulations. I am sure that that derives from his previous experience of working in this field. I could address all those points—or, at least, as many as I managed to write down while he was speaking. He mentioned the complexity of the formula, and we will of course be providing an online calculator. For those firms that do not have access to that, the Inland Revenue will be perfectly willing to help anyone who phones in and asks for the calculation to be made on their behalf. I am sure that the hon. Gentleman need not be too worried about many of the points that he raised. I can write to him in due course to set the record straight. For example, he asked what was meant by "same premises" in relation to sale and lease-back relief, and I can assure him that it means the same area of land, not the same building. He also asked about chain breaking, and why we were excluding sole traders. I can inform him, following the consultation in which we have engaged, that the businesses active in this market are companies, or companies that organise themselves into partnerships, so the relief is targeted at those who need to benefit from it.
	The hon. Gentleman's points on chain breaking were also relevant. He mentioned asbestos, and asked whether the threshold was high enough to allow firms to refurbish their properties when dealing with asbestos. I can assure him that the cost of dealing with asbestos does not count as part of ordinary refurbishment costs and would therefore be exempt from that limit.
	I remind the House that the regulations that we are laying today will modernise the system. They are fair, and they will ensure that all businesses pay their fair share of lease duty.
	They relieve companies in many ways. There is relief for chain-breaking companies and those involved in employee relocation, sale and lease transactions and surrender and re-grant of leases. There are provisions to reduce the compliance burden, and to provide certainty with regard to leases involving uncertain rents.
	For those reasons, I commend the regulations to the House.

Question put:—
	The House divided: Ayes 313, Noes 189.

Question accordingly agreed to.
	Resolved,
	That the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2) Regulations 2003 (S.I., 2003, No. 2816), dated 5th November 2003, a copy of which was laid before this House on 5th November, be approved.

Taxes

Motion made, and Question put,
	That the draft Stamp Duty Land Tax (Amendment of Schedule 5 to the Finance Act 2003) Regulations 2003, which were laid before this House on 30th October, be approved.—[Ruth Kelly.]
	The House divided: Ayes 317, Noes 186.

Question accordingly agreed to.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Education

That the draft Education (Amendment of the Curriculum Requirements for Fourth Key Stage) (England) Order 2003, which was laid before this House on 30th October, be approved.—[Mr. Ainger.]
	Question agreed to.

SCHOOL TRANSPORT (ESSEX)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ainger.]

Alan Hurst: I am pleased to have the opportunity to raise the important matter of free transport to denominational schools in Essex. I am pleased to see my parliamentary neighbour, the hon. Member for West Chelmsford (Mr. Burns), in his place this evening, and my hon. Friends the Members for St. Albans (Mr. Pollard), for Harwich (Mr. Henderson) and for Thurrock (Andrew Mackinlay) are here too.
	The genesis of the provision of free school transport lies in the Education Act 1944. That landmark legislation was brought before the House by the great reforming Minister—the great Prime Minister that the Conservative party never had—the right hon. R.A. Butler. He was a part-predecessor of mine in that he represented the three villages of Gosfield, Earls Colne and White Colne, which are now in the Braintree parliamentary division, but were then in Saffron Walden.
	Since that time, it has been the invariable practice of education authorities to provide free school transport for pupils whose parents have chosen to enrol them in a denominational secondary school. Such provision is subject to the school being more than 3 miles from home and the nearest school of that denomination. In Essex, with one exception, all the schools affected will be Catholic schools in practice. In 1998, the county council ended free school transport for Catholic sixth forms, but it now proposes to end all free transport for Catholic secondary schools in the county, unless the school is more than 3 miles from home and is the nearest school of any type. In practice, that would mean that a child is compelled to go whatever school is nearest if the distance is more than 3 miles.
	Thus, free transport to secondary schools would be ended for every Catholic child in the county, irrespective of their parents' financial circumstances and the school's distance from home. Instead of the free system, the county proposes a charge of £100 per term per child. In its generosity, it is to reduce that amount to £40 for parents whose income is below the qualifying level for income-based jobseeker's allowance. Essex county council indicated that the change would take place for the next school term, which is barely eight weeks away. At least, that was the position until some point this afternoon, when a county policy meeting occurred and the council backtracked somewhat on its earlier proposal. It is now proposing to introduce whatever changes it will make next September.
	Frankly, I do not see that as a major concession to the principle of free school transport in our county. The original proposal breached the departmental guidelines, which say that, unless there are compelling reasons, policy should be changed only at the beginning of the school year. I believe that the faith of the county council is also being tested further than that. An implied contract exists not in law, but in ethics, between the county and parents, who will have read the prospectuses of Catholic secondary schools in deciding which school they would send their children to and would have been assured that free school transport was available.

Ivan Henderson: There are two Catholic primary schools in my constituency—St. Joseph's in Harwich and St. Clare's in Clacton. The only option that children from both schools have is to go to St. Benedict's in Colchester. Does my hon. Friend agree that it is unfair to force a charge of £100 a term on those children's parents now they are attending that school in Colchester? Those parents only option is to pay the money if they can afford to do so or to pull their children out and send them to another school, which would completely disrupt their education.

Alan Hurst: My hon. Friend is absolutely right. Indeed, the position that he describes replicates that of children in my division who attend the same secondary school in Colchester as those in Clacton and Harwich. In my judgment, there is a lack of good faith in allowing parents to put down their child's name for one school on the basis a particular premise, after which the authority changes the rules halfway or a few weeks into the process. That does not seem an even-handed system for parents. Hon. Members will realise that the proposals have caused uproar in Essex.

Kerry Pollard: Does my hon. Friend accept that there is a problem not only in Essex, but in my county, Hertfordshire, where many parents are worried that the same thing may happen? Does he agree that some new thinking is required? For example, school starting times could be staggered so as to let older pupils start at 8 o'clock in the morning or transport, could be collectivised in the same way as county supplies so that several counties could join in providing the transport system.

Alan Hurst: I am grateful to my hon. Friend. Imaginative ideas are needed to resolve these difficulties, but provision for children should be at the forefront in our minds.
	I am pleased to see the hon. Member for Rochford and Southend, East (Sir Teddy Taylor) in the Chamber. He no longer represents a division of the county, but one of the lost territories, if I can put it that way. He may have the opportunity to tell us how the borough of Southend is dealing with the matter.

Teddy Taylor: I know that the hon. Gentleman always tries to be fair, so will he make it clear to his colleagues—who are listening carefully to him—that no decision has yet been made, and the only reason why the county has to consider this and other horrible plans is the appalling financial settlement that Essex has received from the Government? On that particular point, does he realise that I and my hon. Friend the Member for Southend, West (Mr. Amess) went to see the Minister only yesterday to try to obtain further money for education because we are so short of it in Southend, even though we are very careful? He said that we could put the rates up more. I hope that the hon. Gentleman will accept that the county is in a difficult position because of the appalling financial settlement that it has had from the Government, and it does not want to do nasty things like charging for school transport.

Alan Hurst: Generosity is a virtue in humankind, but I fear that it was misplaced in allowing such an intervention. I have tried to avoid even naming which party is running the county council or the borough of Southend, and it was not my intention to inquire into the financial management of either, notwithstanding the fact that both have received substantial increases in the past six years. It is for residents in both county and borough to consider whether the financial resources allocated to those areas are properly managed. I had hoped to avoid partisanship, and I shall seek to continue to do so for the remainder of my speech, unless misled in another direction.
	The county council has conducted a consultation exercise. If there is one word that strikes terror into the minds of everyone in public life, it is the word "consultation", which should usually be put in inverted commas. The council omitted formally to consult school governors, who are now an important part of any education system and bear great responsibilities. There was no formal consultation of governing bodies. The council heard from school governors because parents speak to them, and that was how they learned about the consultation exercise.
	I understand that a petition with more than 2,500 names has been delivered to the county council, objecting to the proposals. Some 1,000 letters of protest have been received, and only five in favour. If consultation has any meaning close to that shown in a standard English dictionary, I would have thought that the county council would concede that the consultation has reached a verdict and abandon its proposals. Hon. Members will not be surprised to hear that that has not, alas, been the case.

Teddy Taylor: Yet.

Alan Hurst: The hon. Gentleman says "Yet", if my ears do not deceive me. I accept that the council met this afternoon and has slightly diluted its proposals by putting back the start date. I understand that it has also raised the prospect that because of the disruption and hardship that could be caused to children in their GCSE year, it may re-examine that aspect of the proposal. Frankly, that does not satisfy me and it will not satisfy the parents in the county of Essex.
	The Braintree parliamentary division does not include a Catholic secondary school. The children from Catholic families travel to Colchester, to St. Benedict's, or to Chelmsford, to St. John Payne. I have spoken to parents and governors of both schools. The headmaster at St. Benedict's, Mr. Alan Whelan, tells me that he has about 500 children in receipt of free school transport. Mr. Frank McAvoy, headmaster of St. John Payne, has about 680 children in receipt of free school transport. The best estimate one can make is that some 250 children from the Braintree parliamentary division travel to Catholic secondary schools every day.
	The arguments against the proposal are overwhelming. For a start, it would discriminate against poorer families. A family with three children in secondary education would be charged £900 per annum from taxed income. Even those on benefit would need to find £120 a year, or more than £2 a week. The poorest would suffer, and the threat is already demoralising parents and children. One school fears that it has already lost four pupils.
	There is also discrimination against the Catholic community. Catholic parishes originally paid 25 per cent. of the cost of constructing the two secondary schools that serve mid and North Essex, and today they continue to contribute 10 per cent. of the cost of external maintenance and renovation. In fact, I am told that the Catholic community has recently paid £20,000 towards the cost of a new roof for St. Francis Catholic primary school in Braintree. Catholic parents already pay over and above what other parents pay towards their children's education. As a consequence, they are saving the county council costs that it would otherwise have to find. To add transport costs is unfair and, frankly, demeaning to the county council.
	Savings are like a will-o'-the-wisp: exactly what the savings are and where they will come from can never be pinned down. If the charging policy is introduced, Catholic schools rolls may well reduce. Without being an advanced mathematician, I can say that, as a consequence, the average cost per child to the county will rise if there are fewer children but the establishment remains much the same.
	Many Catholic children who live in rural areas will still be entitled to free school transport to their nearest county school. The transport costs will remain, but they will go to a different school. I know that hon. Members can imagine the disruption that that will cause to young children's education, so it is not for me to say more about that. Those children will be taken away from a secondary school, where they had friends whom they have been with ever since they entered primary school, and they will go to a school where they know virtually no one, part way through their school careers. I cannot understand how the consequences of that will produce any saving of any kind to the county, the parents or the children.
	I cannot speak for other parts of the county, but most of the schools in Braintree district are already over-subscribed. Accommodating extra children who have been driven out of their schools of choice by the charging policy will produce a cost to the county for new buildings, extra teachers and equipment. The costs will just move along. How the county council could imagine in its great foresight that introducing that policy would not outrage all right-thinking people way beyond the Catholic community I do not know. How it thought that it could introduce it without medium and long-term costings I do not know. How it thought that it could introduce it at the beginning of January, when it has not even completed the process in mid-November, is beyond comprehension.
	The consequence of the policy and driving out poorer children from the schools of their choice will be to change the nature of Catholic secondary schools. Those schools admit children irrespective of parental background or academic achievement. If the ending of free school transport causes children from poorer backgrounds to transfer to other schools, their places may be taken by non-Catholics from better-off families. The character of those schools may be imperilled over time.
	Almost finally, I wish to deal with traffic congestion because this is partly a transport debate as well as an education debate. In some ways, although it would be a conceit, perhaps two Ministers should reply to the debate rather than one, but I appreciate that it is not beyond my hon. Friend the Minister's ability to speak about transport as well as education. All hon. Members know the effects of taking children to and from school on travel congestion. What joy it is, when the school holidays come, to be able to drive to any place that one wishes and arrive on time and, occasionally, even before time.
	It has been estimated that between 8 and 9 o'clock in the morning, 11 per cent. of all cars on the road in term time are taking children to school. When we reach the magical point of 10 minutes to 9, 20 per cent. of all cars on the road are involved in school trips. To take away free school transport can only aggravate the situation and a greater burden will be placed on parents, children and other road users. There is a particular problem for parents with children at both a local primary school and a secondary school. The primary school, particularly one in the Catholic faith, is likely to be in one town, and the secondary school is highly likely to be in another town many miles distant. There is some considerable distance between Chelmsford and Braintree, so it would be necessary for those parents to be in two places at the same time as they transport their children to school.
	The single most effective way, in my judgment, to reduce car traffic congestion is to increase rather than diminish school transport. It is for that reason that the Government have tested yellow bus schemes in three separate areas and are bringing forward proposals in a jauntily named document, "Beating the traffic—a new approach to the school run". I raised this matter with my right hon. Friend the Secretary of State, and he replied to me in a letter dated 13 October. In that letter he indicated that local authorities would be invited to pilot schemes to support children travelling to denominational schools. It is my judgment that the county council would be far better advised to work closely with the Secretary of State to see not only how free school transport can be retained in our county, but how it can be increased and enhanced.
	The action of the county council flies in the face of all considered thinking about both transport and education. I urge my hon. Friend the Minister who is kindly replying to this debate to seek to persuade those in charge at Essex county council to reconsider and to return free school transport to Catholic secondary schools in the county of Essex.

Simon Burns: May I thank the hon. Member for Braintree (Mr. Hurst), my neighbour, for allowing me to take part in this debate which refers to a matter of importance not only to mid-Essex but to the entire county? I found little with which to disagree in his elegant speech, which was equally interesting in terms of what he did not say, quite apart from what he did say.
	A serious problem is affecting the whole county, but it is focused on mid-Essex, because, as the hon. Member for Braintree said, he has a Catholic secondary school in his constituency, and I have a Catholic secondary school in my constituency, St. John Payne school. Great concern has been expressed by parents, teachers and governors of both schools about the proposals by Essex county council that are currently out to consultation. I, too, have met both pupils and representatives of the teaching staff of St. John Payne school, and have had an opportunity to discuss their concerns with them and to learn at first hand about the proposals. I have also received many letters about those proposals. They pose a significant problem and if there is a way around it that avoids school transport being withdrawn from denominational schools, all of us in the Chamber would obviously be united in agreement that that is how we would want the process to end.
	There is a problem, however, to which my hon. Friend the Member for Rochford and Southend, East (Sir Teddy Taylor) alluded earlier in an intervention: the formula for funding local government finance was changed for this financial year, and it had a significant impact on the county of Essex. As I understand it, the average increase in local government finance this year was just over 5.5 per cent. Essex got the third worst settlement, just ahead of Kent and Sussex, with 3.5 per cent.
	As the Minister and the hon. Member for Braintree know, the significant majority of a local authority's budget is spent on education and there are specific requirements on that spending that must be fulfilled. As Essex county council received only a 3.5 per cent. funding increase, it had significantly less money to provide its services than it did the previous year. Owing to the statutory requirements on its education spending, it had considerable problems funding other services, such as social services. Ironically, it did not have sufficient money for its education budget either and had to decide the best way forward when it was faced with that problem. The council wants to avoid cutting back on teaching staff or spending for books and equipment in our schools, so it has examined its transport budget. Colleagues and county councillors have given me no inkling that the Government are prepared to think again, but perhaps the Minister will give us some good news during his speech. In the light of the consultations and representations, however, I hope that a solution will be found so that some of the problems that the hon. Member for Braintree rightly raised will not be realised. I hope that the council will be able to come up with a solution.
	The simple way in which we could get around the problem and secure proper funding for the county council would be for the Government to re-examine the funding formula for Essex and ensure that they rectify the fiddling that many people in local government and Conservative Members believe to have happened. There is a strong body of opinion that the formula was changed solely to take money away from the shire counties that, ironically, tend not to be controlled by Labour so that it could be pushed into Labour heartlands to try to stave off any problems in the local election last May when the party faced re-election.

David Miliband: Disgraceful.

Simon Burns: The Minister may say that that is disgraceful, but he goes around the country a lot and must talk to local education authorities throughout England. He must be aware that there is a school of thought that the situation that I outlined is why the funding formula was changed.
	If we are to prevent the problems faced by Essex county council from happening, the Minister should use his not inconsiderable influence to encourage the Government to re-examine the basic funding formula and ensure that Essex county council gets a fair funding increase so that it is able to provide education services. That would have a knock-on effect on other services, which would mean that it would not have to take extremely difficult decisions such as that on which it is consulting. I hope that a compromise can be reached that will put off the implementation of the policy.

Andrew MacKinlay: There is little point in arguing party political points this evening. Does the hon. Gentleman understand the gravity of the situation for the continuation of Catholic education? If the policy were sustained, Catholic schools would change beyond all recognition within a generation—there would be none left. That is the gravity of the situation, so the matter should be a priority for Essex county council, as it is for other hard-pressed authorities.

Simon Burns: I thought I had made it plain that I hope the proposals do not come to fruition. I fully accept and recognise that they will have an impact, which for some families will be significant, on all denominational education, which in my constituency is primarily Catholic. I assume the hon. Gentleman, like me, fully supports the concept of denominational education.

Andrew MacKinlay: I am a beneficiary of it.

Simon Burns: I am glad to hear it.
	I understand why the hon. Gentleman says that the matter is not a party political issue, but he misses the point. The nub of the problem is the local government finance settlement, which was particularly detrimental to the county of Essex, as it was to Kent and Sussex, when the money arrived in April this year.

Teddy Taylor: I remind the Minister and the hon. Member for Braintree (Mr. Hurst) that the problem has a great effect on my constituency and other places in Essex. Southend has two Catholic schools, St. Thomas More, which is a school for boys, and St. Bernard's, which is a school for girls. A substantial number of pupils come across the border from Essex county council, which we have escaped from, to go to our schools. We also have four grammar schools, two for boys and two for girls, which hon. Members know about.
	Children come from Essex to attend our schools because it is well known that the standard of education generally in Southend is high compared with neighbouring areas. A huge number of children want to come to Southend first, for the good education, secondly, for the grammar schools and the two good Catholic schools and thirdly, for their traditions. The hon. Member for Braintree made a good point about the effect of the proposals on poor families. That is encouraging. I hope that we unite against legislation on top-up fees because of their effect on poor families.
	There is a big problem, which the Minister can resolve. Yesterday morning, I took the head teacher of that splendid school in Southend, St. Thomas More, and others to meet the Minister. They told him the terrible things that were happening in Southend. Does the hon. Member for Braintree, who takes a great interest in Southend, know that for the first time we are having to discontinue the teaching of Latin, not because we want to or because it is horrible, but because there is not enough money? Not only has Southend-on-Sea borough council spent every penny the Minister provided, but it has been given an extra £700,000 on top because of the financial crisis it faces. Despite that extra money, a teacher called Mr. Gulley from Temple Sutton school told the Minister yesterday that he had to sack teachers because the necessary money was not available.
	The Minister must know, on the basis of what happened yesterday and what he has heard today, that Essex county council and Southend-on-Sea borough council have to contemplate doing horrible things that they do not want to do simply because the money is not available. Why is the money not available and why are they thinking of introducing such strange plans? First, the pay scale has been shortened, so teachers have to be paid more in a shorter time. Secondly, the increase in superannuation payments has not been fully funded by the Government. Thirdly, there are national insurance increases to consider. All those mean that the county and the borough have to consider doing things that they do not want to do.
	Let us solve the problem that faces the parents of children going to Catholic schools in Essex and the splendid ones in Southend-on-Sea. The only way to do that, however, is to find a financial solution. There is no other way. We could put the rates up, but we have already done that. The Minister must be aware that the poor ratepayers in Southend and Essex have been hammered. I am sure that we could do a deal. I am sure that if the hon. Member for Braintree, my hon. Friend the Member for West Chelmsford and I told the county council that, despite the appalling financial settlement, the Minister had announced in an Adjournment debate that he was providing an extra £2 million for the county of Essex, the proposals would be dropped and a comprehensive, sensible arrangement would be agreed.
	I am sure that, like me, hon. Members believe that the proposals that the council is considering are not advantageous. As has happened in Southend, the financial difficulties would stop educational training and prevent us from getting good teachers. If the Minister tells us that he will provide an extra £2 million for the county, I am sure that we can meet the county officials and councillors and solve the problem. The only thing that worries me a wee bit is the fact that people may play at politics. I hope that that will not happen, because it is in children's interests that we find solutions.
	We have good Catholic secondary schools in Southend, and want to preserve the opportunity for the people of Essex, with all their problems, to come to our excellent schools. It would be tragic if they were prevented from doing so. The Minister alone can solve the problem. If Members from all parties presented a popular front we could resolve this with our friends from Essex, if only the Minister were sensible and gave the county a fairer deal, as he has done for other counties.

David Miliband: It is always a pleasure to be offered the chance to make six or seven friends with a quick bit of spending, but I fear I would make a large number of enemies if I followed the advice of the hon. Member for Rochford and Southend, East (Sir Teddy Taylor).
	I congratulate my hon. Friend the Member for Braintree (Mr. Hurst) on securing this debate and on his long-standing interest in the topic. I believe that he secured a debate in July 2000 on related issues, and throughout his time in Parliament he has made Ministers and the House aware of the links between transport and education, and the importance of transport to successful education. He therefore deserves the thanks of the House for his work.
	The Government recognise the problems and frustrations experienced by many parents regarding school transport, whether provided privately, such as travel by car, or by a local authority. The latest figures show that over the past 20 years car use has doubled, and that one in five cars on the road at 8.45 am or 8.50 am are taking children to school. Many of those cars are taking children to primary schools, some of which are denominational, and many make journeys of between one and three miles. The House will know that the public purse spends more than £0.5bn a year on school transport, about half of which goes towards special needs provision, leaving about £0.25 billion for other school transport.
	For the benefit of the House, I shall deal with the legal position, then turn to issues affecting Essex in particular. The contribution of the hon. Member for West Chelmsford (Mr. Burns) will tempt me into areas of local government finance, and I look forward to illuminating the House on some of the finer points of the matter. However, it is important to make it clear that transport is always necessary for a pupil of compulsory school age who attends the nearest suitable school if it is beyond statutory walking distance. Local education authorities do not have a duty to provide free transport for pupils whose parents have chosen to send them to another school, even if it is beyond statutory walking distance. Those cases are entirely at the discretion of individual local authorities.
	I shall set out the legal position for the House. The Education Act 1996 sets out LEA responsibilities to provide free transport to school for pupils of compulsory school age. Section 509(1) requires LEAs to make arrangements for the provision of transport that they consider necessary for pupils to attend school. That transport must be free. Section 509(3) enables authorities to pay all or part of a pupil's travelling expenses where transport is not "necessary", and I shall say more about arrangements for discretionary transport later. The purpose of the legislation is to make sure that every child can attend school, and section 444 of the 1996 Act states that no parent can be prosecuted for their child failing to attend school if the LEA fails to provide suitable transport for children who live beyond the statutory walking distance.
	As my hon. Friend said, LEAs must provide free transport to denominational schools where pupils live beyond the statutory walking distances and where a denominational school is designated as the nearest school. Where pupils live closer to a non-denominational school, LEAs may provide free transport to a denominational school of a parent's choice if they consider that it is "necessary", or they may exercise discretion and provide free or subsidised transport.
	Current DFES guidance to LEAs on denominational transport is that the Secretary of State hopes that LEAs will continue to think it right not to disturb well established arrangements of the kind that I described, some of which have been associated with local agreements or understandings about the siting of denominational schools. The Secretary of State continues to attach importance to the opportunity that many parents have to choose a school or college in accordance with their religious convictions. It is important to say, however, that there is no statutory duty requiring LEAs to provide free transport to denominational schools.
	I remind hon. Members that statutory school transport is not the only source of assistance for young people with travel costs. Local authorities have powers to establish concessionary fare schemes for young people in their area under the Transport Act 1985. About 40 per cent. of shire counties have such schemes, many of which assist pupils making the home-to-school journey. In the metropolitan areas, all six passenger transport authorities provide flat fares or half fares on local buses. Tempted as I am to delve into the role of passenger transport authorities in transport policies, I hope that my hon. Friend will forgive me if I do not go too far down that route. In the capital, Transport for London, not the local authorities, operates a season ticket discount scheme for young people at roughly half fare. That is a commercial scheme without Government subsidy. Under-11s will be entitled to free bus and tram travel from January 2004.
	My hon. Friend did not ask about post-16 transport, either in general or in relation to denominational schools, but I am happy to write to him if he is interested in that particular issue.
	I shall move on to the management of budgets, which involves critical decisions for LEAs. There are many calls on LEA budgets and school budgets. Funding for home-to-school transport forms part of an authority's LEA budget. We do not seek to influence the level of that budget, unlike the schools budget: it is for authorities to decide on the level of their LEA budget within the total resources available. In doing so, they will of course need to provide a level of service consistent with their statutory duties. There are often calls for improvements in home-to-school transport financed from the education budget—although it is worth repeating that expenditure is already at a high level and has risen fast in recent years. Over the past 10 years, annual increases have been between 6 per cent. and 11 per cent.—well ahead of inflation—and the cost of transporting pupils with special needs has accounted for an increasing proportion of the total spend on home-to-school transport.
	In preparing for the debate, I was struck by the fact that some authorities have sought to contain costs and improve services through a range of measures such as integrating education and social care transport provision—for example, in Oxfordshire and Worcestershire—and introducing staggered school starting times, which my hon. Friend the Member for St. Albans (Mr. Pollard) mentioned, and which has been done in the Isle of Wight and in west Sussex. Elsewhere, LEAs have developed dedicated bus services to raise the standard of provision: that has increased uptake at minimal cost and helped to ameliorate pollution. Transport authorities, education authorities and schools are working together to put in place cost effective, high quality provision for schoolchildren—for example, the new services provided by bus operator Harrogate and District, in Harrogate, and by the Greater Manchester Passenger transport authority, in Wigan and Stockport.
	I turn to the situation in Essex. I know that Essex LEA's proposals are of great concern to that county's residents, including county councillors and hon. Members who represent Essex constituencies. Most recently, on 16 October, the hon. Member for Colchester (Bob Russell) asked the Secretary of State what representations he has received over proposals by the LEA to charge travel costs for pupils attending faith schools. The Department has received more than 50 letters from hon. Members, councillors, parents and schools. All opposed the proposals, and a number complained that the consultation process was flawed. The local education authority will obviously want to take that seriously. The matter needs to be considered in the appropriate way in due course.
	Let me deal with funding. The pot of money is limited and that requires difficult decisions about priorities. The position in Essex is different from that which the hon. Member for West Chelmsford described. Since 1997–98, per capita spending on pupils aged three to 19 has increased by 24 per cent. in real terms. That is £670 per pupil. In 2003–04, Essex received an increase of 3.2 per cent. per pupil on top of a separate transfer, which compensated for teachers' pay and the transfer of nursery grant and infant class size grant. Apart from the education formula spending share, there is the important revenue support grant. In Essex, it increased by 3.8 per cent. on top of a transfer of £586 million to provide funding for teachers' pension contributions.

Simon Burns: What about the rest of the country?

David Miliband: I shall deal with that shortly.
	A further increase of 3.2 per cent. reflected the end of some standards fund grants. Like other local education authorities, Essex has also received generous standards fund increases, from a mere £7 million in 1998 to £46.8 million in 2002–03. Capital funding has increased from £13.8 million in 1998–99 to £64.4 million in 2003–04. For this year, the education formula spending total is £666 million, of which £20 million is spent on free home-to-school transport for approximately 21,000 pupils. Next year, the floor increase will be 5 per cent. per pupil—

Simon Burns: What about this year?

David Miliband: The hon. Gentleman says that he wants to talk about this year, but Essex county council's proposals are for next year. That is the focus of the current debate. The hon. Member for Rochford and Southend, East mentioned the meeting that I held with his constituents yesterday. I do not deny that some schools in some parts of the country have experienced genuine problems this year. The Secretary of State has dealt with them in successive statements in the House.
	Last week, my right hon. Friend announced a floor of 5 per cent. per pupil for every LEA in the country. That is significant protection for LEAs. In addition, he announced a transitional grant of £9.8 million for next year—I was disappointed that the hon. Member for West Chelmsford did not mention that. It is intended to target problems in school budgets. The hon. Gentleman also made the extremely serious allegation that the Government were somehow fiddling the local government funding system. I reject that. He should know that there are three simple parts to funding education. First, there is an entitlement of £2,100 per pupil.

Kerry Pollard: Will the Minister enlighten us about the way in which Essex fared in the pecking order for transitional grant?

David Miliband: Much as I should like to give my hon. Friend a full recitation, I cannot do that.

Kerry Pollard: I was trying to help my hon. Friend. Essex came second after Kent, and Hertfordshire came third.

David Miliband: I am sure that all hon. Members are pleased that Essex benefited from the Government's decision to ensure that every LEA has at least a 12 per cent. increase over two years.
	The hon. Member for West Chelmsford said that the education formula was fiddled.

Simon Burns: The Minister must have misunderstood me. I said not that the education formula was fiddled but that the funding formula for the whole of local government was fiddled this year in the way it was changed.

David Miliband: I am happy to accept the hon. Gentleman's statement that he does not believe that the education formula was fiddled. I understand that he is making a wider point about local government funding and that is probably a subject for another debate.
	Let me try to end the debate on a more harmonious note. Hon. Members know that the Government launched a document about school transport on 17 September. It offers a way forward for several LEAs, including Essex. The plan set out ways in which walking, cycling and bus use could be extended for journeys to school. The document explained that we were planning to legislate as soon as possible to allow LEAs to trial new approaches to school transport.
	We envisage enabling legislation which would allow a number of pilot schemes to run for several years, trialling new approaches to school transport. LEAs will be able to charge for school transport, but not to the extent that parents find that the family car is a more cost-effective option. We want LEAs interested in trialling new arrangements to consult their schools, pupils, parents, bus operators and further education colleges on an alternative scheme, along the lines of the new post-16 arrangements that have been discussed in the House on several occasions. Authorities might, for example, design and consult on a scheme that supersedes the statutory walking distances; enter into innovative arrangements with schools or other agencies to provide school transport services fitted around an extended school day; and investigate school transport provision catering for the circumstances of denominational schools.
	The primary objective of any local scheme would be to increase the choices available to parents and pupils for ensuring effective home-to-school transport. If we create such flexibilities, we envisage that we would look carefully at the experience of the first few authorities pioneering new arrangements before proceeding further. I hope that Essex county council, along with the schools and parents in the area, will reflect on the opportunities that are presented by the scheme. I hope that when they reflect on the strong statements that have been made on both sides of the Chamber, expressing concern about the proposals that have been made, they will also examine the value-for-money arguments that are important to any decision on the priorities for school spending, and bear in mind the powerful case made by my hon. Friend the Member for Braintree, whose expertise has really helped to enlighten the House today.
	Sitting suspended, pursuant to Order.
	On resuming—
	Question, That this House do now adjourn, put and agreed to.
	Adjourned accordingly at Seven o'clock.